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Once again I am reminded of the circular nature of money flowing around in this economy. Michael Burry even commented on this, citing it as rhyming like other e

Once again I am reminded of the circular nature of money flowing around in this economy. Michael Burry even commented on this, citing it as rhyming like other economic failures previously.

zer00eyz 11mo ago
> Once again I am reminded of the circular nature of money flowing around in this economy. Its called the velocity of money, its a thing see: https://en.wikipedia.org/wiki/Velocity_of_money https://en.wikipedia.org/wiki/Velocity_of_money The problem is that there is all this capital and no place to put it, so yes it seems circular, but some of that is to be expected. As for Burry, he recently called out the changes to how the big players are amortizing their capital expenses for all these data center build outs. He is correct in calling it out, but he's getting the wrong signal from it. Mores law died a long time ago, and now were basically hitting multiple walls at the same time: Node scaling at the chip fabs, power and cooling in the data center, and just more linear growth from product (because of all three factors). Go back to 2008 ish time period. There were a lot of data centers that hit the wall with availability of power and cooling and they were hard problems to solve then. The solution was not to upgrade rather to "build new", and were seeing a lot of the same types of issues today. Nvidia has unmaintainable margins, the memory manufacturing side is now in on the grift too... They are sucking up the profit while they can because the dip is going to be BRUTAL (likely a boon to consumers but neither here nor there).
- satvikpendem 10mo ago
  The general concept of the velocity of money is not what I'm talking about, it's specifically about vendors buying equity in their users who then buy the vendors' goods, in a tight circular fashion. See the other comments for more.
fooker 11mo ago
Money flowing in a circular manner is the definition of economy. This is the reason we moved to using money instead of a barter system.
- krupan 11mo ago
  This is a much tighter circle than any of us should be comfortable with. There are some horrible examples of companies investing in their costumers and then losing big when those customers fail.
  - fooker 11mo ago
    It’s a medium risk high reward strategy. You only fail here if all the customers fail, which admittedly there’s a chance of. If one succeeds, and grows 10-100x, you are profitable. If a few succeed, you double your market cap.
    - krupan 11mo ago
      Businesses fail long before all their customers fail. If Nvidia's sales decline and they lose their billions of dollars in investments at the same time you better believe their stock will tank. I'm not sure how you decided this is only medium risk. Especially when they have invested in customers with no profits (OpenAI) and/or severely depressed growth (Intel)
      - fooker 11mo ago
        I did not say Nvidia does not have risk. I specifically meant this circular investment idea is medium risk. Of course Nvidia can tank if sales decline.
- pigpop 11mo ago
  This dig at the relationships between these companies also seems odd to me. Isn't this fairly normal practice for companies within an industry? There are lots of examples of joint ventures, partnerships, alliances, investment and mergers and acquisitions between lots of other corporations that are in competition with each other. I don't see how it could be otherwise unless each corporation was entirely vertically integrated so that they never had to work with any other.
  - 11mo ago
krupan 11mo ago
We should all be worried. When a company invests in it's customers it is extra exposed to the risk of that customer going under. If OpenAI fails, Nvidia loses sales and loses the money it invested in OpenAI. I imagine it's a similar story. If Intel fails, Nvidia loses sales and this investment.
- satvikpendem 11mo ago
  Yes exactly, not sure why I'm being downvoted, other replies are talking about general economic money velocity as if that's somehow relevant to this specific case.
  - zepearl 11mo ago
    I interpreted your post like what "krupan" posted in the separate sub-thread ("This is a much tighter circle than any of us should be comfortable with"), but maybe others interpreted it differently (the words of your post are quite generic...). Cheers :o)
- octoberfranklin 11mo ago
  Stop worrying and figure out how to short it.

Once again I am reminded of the circular nature of money flowing around in this economy. Michael Burry even commented on this, citing it as rhyming like other economic failures previously.

zer00eyz 11mo ago

> Once again I am reminded of the circular nature of money flowing around in this economy. Its called the velocity of money, its a thing see: https://en.wikipedia.org/wiki/Velocity_of_money https://en.wikipedia.org/wiki/Velocity_of_money The problem is that there is all this capital and no place to put it, so yes it seems circular, but some of that is to be expected. As for Burry, he recently called out the changes to how the big players are amortizing their capital expenses for all these data center build outs. He is correct in calling it out, but he's getting the wrong signal from it. Mores law died a long time ago, and now were basically hitting multiple walls at the same time: Node scaling at the chip fabs, power and cooling in the data center, and just more linear growth from product (because of all three factors). Go back to 2008 ish time period. There were a lot of data centers that hit the wall with availability of power and cooling and they were hard problems to solve then. The solution was not to upgrade rather to "build new", and were seeing a lot of the same types of issues today. Nvidia has unmaintainable margins, the memory manufacturing side is now in on the grift too... They are sucking up the profit while they can because the dip is going to be BRUTAL (likely a boon to consumers but neither here nor there).

satvikpendem 10mo ago
The general concept of the velocity of money is not what I'm talking about, it's specifically about vendors buying equity in their users who then buy the vendors' goods, in a tight circular fashion. See the other comments for more.

fooker 11mo ago

Money flowing in a circular manner is the definition of economy. This is the reason we moved to using money instead of a barter system.

krupan 11mo ago
This is a much tighter circle than any of us should be comfortable with. There are some horrible examples of companies investing in their costumers and then losing big when those customers fail.
- fooker 11mo ago
  It’s a medium risk high reward strategy. You only fail here if all the customers fail, which admittedly there’s a chance of. If one succeeds, and grows 10-100x, you are profitable. If a few succeed, you double your market cap.
  - krupan 11mo ago
    Businesses fail long before all their customers fail. If Nvidia's sales decline and they lose their billions of dollars in investments at the same time you better believe their stock will tank. I'm not sure how you decided this is only medium risk. Especially when they have invested in customers with no profits (OpenAI) and/or severely depressed growth (Intel)
    - fooker 11mo ago
      I did not say Nvidia does not have risk. I specifically meant this circular investment idea is medium risk. Of course Nvidia can tank if sales decline.
pigpop 11mo ago
This dig at the relationships between these companies also seems odd to me. Isn't this fairly normal practice for companies within an industry? There are lots of examples of joint ventures, partnerships, alliances, investment and mergers and acquisitions between lots of other corporations that are in competition with each other. I don't see how it could be otherwise unless each corporation was entirely vertically integrated so that they never had to work with any other.
- 11mo ago

krupan 11mo ago

We should all be worried. When a company invests in it's customers it is extra exposed to the risk of that customer going under. If OpenAI fails, Nvidia loses sales and loses the money it invested in OpenAI. I imagine it's a similar story. If Intel fails, Nvidia loses sales and this investment.

satvikpendem 11mo ago
Yes exactly, not sure why I'm being downvoted, other replies are talking about general economic money velocity as if that's somehow relevant to this specific case.
- zepearl 11mo ago
  I interpreted your post like what "krupan" posted in the separate sub-thread ("This is a much tighter circle than any of us should be comfortable with"), but maybe others interpreted it differently (the words of your post are quite generic...). Cheers :o)
octoberfranklin 11mo ago
Stop worrying and figure out how to short it.