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can you elaborate? why do you think so? not trying to be hostile, i want to fully understand your point of view. I am under the impression AI is solving many p

can you elaborate? why do you think so? not trying to be hostile, i want to fully understand your point of view. I am under the impression AI is solving many problems, more start ups...requires money... nvidia has money.... why is it a ponzi scheme?

vineyardmike 3y ago
Presumably, this person thinks so because a lot of the cost of running an AI company is buying GPUs, which is mostly going to NVidia. The implication with this headline is that NVidia is propping up sales or driving demand by giving money to startups who will combine it with other investors money and eventually pay it back to NVidia. Is it a Ponzi scheme? Not strictly, but is interesting to see a company investing in their customers. There’s nothing wrong with doing so, but it’s interesting to see it at a time when demand is so high it can’t be sated.
tsimionescu 3y ago
I don't agree with the GP, but I tthink the logic is that most of the money that AI startups pay is ultimately going to Nvidia. So, if most of the money is coming from Nvidia and going back to Nvidia, then Nvidia is self-dealings to some extent and artificially increasing their own valuation. Of course, this doesn't make it a Ponzi scheme, it would at best be a different type of fraud. And it ignores the fact that the money isn't moving so directly - the AI companies are typically buying GPU compute power from a cloud provider, and it is the cloud provider paying Nvidia. Still, if you're investing in Nvidia, you should keep an eye on this. It may mean that some of the increased demand for Nvidia GPUs is artificially sustained by Nvidia itself.
svnt 3y ago
People think it is a problem because with AI startups most of the money in these investments comes right back to nvidia as revenue. So nvidia gets to do this: 1) start with $100 M 2) invest in startup 3) get investment worth at least $120 M (investment at discount) 4) reflect 20% gain on books 5) receive $80 M in guaranteed revenue (H100s) So before the inevitable long-term failure of 90% of these startups, nvidia gets to reflect a nearly immediate 100% gain on any money they run through this. Then they use the gain to invest in more startups where the only thing guaranteed is the purchase of nvidia chips. When the startups go to zero and the market is flooded with used H100s they probably believe they will release a new arch and repeat.
- datadrivenangel 3y ago
  It's an investment/gamble that is realized as revenue now, but is cashflow negative. This may be competitive with throwing that money at additional sales/marketing activities, but long term creates the risk that they have to write off a lot of equity and the whole program will have been a loss.
  - 8ytecoder 3y ago
    Cashflow shouldn't be affected - might even be positive(?). If they invest $X in a startup, it reduces the cash asset but they'll have an offsetting "other investments" based on the valuation of the startup - which should be at least 100% of the total investments the startup has received. I'm guessing here, but, there's a good chance that it'll be cash flow positive as is. Not to mention the fact that most of the money from this investment flows back to Nvidia, adding to the cash flow as revenue.

vineyardmike 3y ago

Presumably, this person thinks so because a lot of the cost of running an AI company is buying GPUs, which is mostly going to NVidia. The implication with this headline is that NVidia is propping up sales or driving demand by giving money to startups who will combine it with other investors money and eventually pay it back to NVidia. Is it a Ponzi scheme? Not strictly, but is interesting to see a company investing in their customers. There’s nothing wrong with doing so, but it’s interesting to see it at a time when demand is so high it can’t be sated.

tsimionescu 3y ago

I don't agree with the GP, but I tthink the logic is that most of the money that AI startups pay is ultimately going to Nvidia. So, if most of the money is coming from Nvidia and going back to Nvidia, then Nvidia is self-dealings to some extent and artificially increasing their own valuation. Of course, this doesn't make it a Ponzi scheme, it would at best be a different type of fraud. And it ignores the fact that the money isn't moving so directly - the AI companies are typically buying GPU compute power from a cloud provider, and it is the cloud provider paying Nvidia. Still, if you're investing in Nvidia, you should keep an eye on this. It may mean that some of the increased demand for Nvidia GPUs is artificially sustained by Nvidia itself.

svnt 3y ago

People think it is a problem because with AI startups most of the money in these investments comes right back to nvidia as revenue. So nvidia gets to do this: 1) start with $100 M 2) invest in startup 3) get investment worth at least $120 M (investment at discount) 4) reflect 20% gain on books 5) receive $80 M in guaranteed revenue (H100s) So before the inevitable long-term failure of 90% of these startups, nvidia gets to reflect a nearly immediate 100% gain on any money they run through this. Then they use the gain to invest in more startups where the only thing guaranteed is the purchase of nvidia chips. When the startups go to zero and the market is flooded with used H100s they probably believe they will release a new arch and repeat.

datadrivenangel 3y ago
It's an investment/gamble that is realized as revenue now, but is cashflow negative. This may be competitive with throwing that money at additional sales/marketing activities, but long term creates the risk that they have to write off a lot of equity and the whole program will have been a loss.
- 8ytecoder 3y ago
  Cashflow shouldn't be affected - might even be positive(?). If they invest $X in a startup, it reduces the cash asset but they'll have an offsetting "other investments" based on the valuation of the startup - which should be at least 100% of the total investments the startup has received. I'm guessing here, but, there's a good chance that it'll be cash flow positive as is. Not to mention the fact that most of the money from this investment flows back to Nvidia, adding to the cash flow as revenue.