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Nvidia is basically allowing some of its clients to pay with partial ownership of their companies instead of with cash for the chips they want, because there's
by scotty79 1y ago
Nvidia is basically allowing some of its clients to pay with partial ownership of their companies instead of with cash for the chips they want, because there's simply not enough cash in them for the lofty goals lots of people think are achievable.
- jonway 1y agoGod that sounds so crazy. Its giving me "sell our municipal water to Private Equity to buy a park, imagine the tax revenue!" vibes except its just diluting the shares. It feels like economics in the US is turning into FanDuel mobile gambling. Can we pass a law to disincentivize this garbage and make them start paying dividends again?
- tarsinge 1y agoIsn’t the problem rooted in stock buybacks? Making it illegal could bring dividends and realign incentives.
- jonway 1y agoPlease! Has Amazon ever paid out a dividend???
- scotty79 1y agoIt's more like "I'm making so much bread and have so much money already. You are making clothes but don't have enough money to buy bread from me to feed your workers so you can't grow. I think our village population will soon explode and there's going to be huge need for your clothing. So how about I give you money to buy bread from me in exchange for partial ownership of your business and its future profits?" It's a perfectly reasonable thing a rich miller could do for a poor but growing village businesses.
- jonway 1y agoNo ... its more like "I'm making so many GPUs and have so much money already. You don't have GPUs so how about I give you GPUs in exchange for partial ownership in your business so you don't have to put this capex on your books that affect your ability to raise other investments, trigger certain disclosures, or make your finances look underwater since the assets will likely bolster your own valuation." Feels gamble-y when the shovel maker is playing weird VC for the gold prospectors like this, but I get the appeal since Nvidia stands to lose everything if this stuff tanks anyhow and it further entrenches Nvidia's own position all while keeping the hype train steaming by moving units.
- scotty79 1y agoThat is an accurate description. It's a gamble that Nvidia takes. Just making chips would be a normal bet. Making chips and getting paid with equity in its customers is like a leveraged bet. If the AI succeeds Nvidia will own significant vertical portion of all of it. If it fails, Nvidia will shrivel. But by deciding to take that risk Nividia tips the scale on its bet making AI more likely to succeed (or just not to fail because of chip and capital starvation).
- jonway 1y agoDo you think its smart to structure commercial ventures this way? In a different space, is it a great idea for a farmer to sell %10 of their venture to John Deere for the tractor?
- scotty79 1y agoIf otherwise farmer would not be able to afford the tractor and starve instead I'd say it's pretty reasonable. You can fund your education with part of your future job earnings. In a perfect world companies should just do their business and nothing else. Companies shouldn't be able to own other companies because that's gambling on their value. They shouldn't be allowed to do stock buybacks because that's gambling on their own value (and a kind of insider trading). In our world however companies are free to gamble on the side as long as their owners don't mind. Whether what Nvidia does is the best or the worst idea, only time will tell.
- NaomiLehman 1y agothat's kind of like writing options. if you think about it, it's not that crazy.
- darth_avocado 1y agoNvidia can do that because what they sell has an insane markup. Nvidia is getting a billion dollars in equity for input spending of a hundred million. Nvidia is creating demand for it’s products and in turn getting ownership in companies for cheap. It’s like being a VC but your investments are chips and the chips also count as revenue for you.