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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:
by 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 agoIt'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 agoCashflow 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.