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Nvidia's $750B in Deals Reignite Circular AI Fears
- bwfan123 3mo agoI guess it gets bigger with each passing day. Tens of billions goes to Hundreds of billions.
- vannevar 3mo agoIt has to get bigger. As soon as it starts shrinking, the next round of debt will no longer be able to cover the prior round of commitments. What is happening in AI is essentially a gigantic version of what is happening in consumer auto loans, they just keep refinancing for more and more money. Eventually there will be no one willing to lend them more, and then they'll go to the government to bail them out.
- apercu 3mo agoI'm not sure a government can bail out these irrational companies and have it not be political suicide.
- fullshark 3mo agoI'd kill my political career for the private sector rewards sure to follow.
- apercu 3mo agoI meant more for the party in charge than any particular individual but I see that was not clear.
- SoftTalker 3mo agoThose companies are already roundly hated by the general voting public, so I agree.
- Terr_ 3mo agoThe public generally doesn't like banks and investment firms either, but they had bailouts in the past.
- surgical_fire 3mo agoThere's one problem with the idea of a bailout. What comes after? Say, for the sake of argument, that the US government bails out OpenAI. Are they now suddenly not a money-burning operation anymore that will need another bail out in a period better measured in weeks? The thing is just very unsustainable.
- ryandvm 3mo agoYeah, I'm pretty sure we've already passed some sort of fiscal singularity where economic and political interests are so intertwined that there can only be growth. If there ever isn't growth, then the legislators (who are elected via corporate sponsorship) will pull whatever levers necessary to make sure that there will always be asset growth. It's some sort of tragic positive feedback loop that isn't going to stop until the whole thing comes crashing down for everyone and we're paying $37,000 for a loaf of bread.
- deleted 3mo ago[deleted]
- renegade-otter 3mo agoThey are just adding zeros to already obnoxious numbers that make no sense. The endgame is on.
- jdalgetty 3mo agoAt what point do I start taking money out of my VTI holdings and parking it in cash - there is no way the market keeps going up.
- scrappyjoe 3mo agoPark it in BRK?
- nickff 3mo agoBRK has been roughly flat since the beginning of 2025; you might be better off in bonds or money markets (depending on your beliefs about near-term inflation).
- niklasd 3mo agoNot that I have any skills in stock-picking whatsoever, but couldn't the recent lukewarm performance not also be an argument for BRK? I mean their cash pile is also invested in money markets (so you get that), and the rest of the portfolio consists of quality companies where their (combined) valuation didn't explode in the last 1,5 years. So it's an opportunity to invest into something that might not be overheated.
- bryanlarsen 3mo agoBRK is 40% cash at the moment. I think "roughly flat" is evidence they're performing the strategy the OP wanted. BRK has stated that they'll buy back in when prices are reasonable again, so it's an automatic "sell-high buy-low" strategy.
- red-iron-pine 3mo agobuffet may be holding his breath for some time markets...irrational... longer than you stay solvent, etc.
- bryanlarsen 3mo ago
- theideaofcoffee 3mo agoIt's come to a point (or has it passed it) that these numbers are completely meaningless. One hundred billion here, $750B there, $1.2T over a year or so, toss in $300B for a few hyperscalers there. There's no imaginable scenario where these are actually backed up with real profit to where the investments make sense. Just passing the same hundred dollar bill among everyone and all booking it as revenue. I can't wait until it pops.
- gdulli 3mo agoDisplacing a vast amount of labor is what makes the numbers make sense. We don't know if they'll succeed or not, but it's obviously what they're chasing. In addition to actual lost jobs, replacing a skilled white collar worker with a fungible operator of AI lowers the salary for that role significantly.
- lopsotronic 3mo agoHave they thought about the expenses in running continental Death Pits? OK, dumb attempt at funny over, but certainly someone is thinking about instability costs? Even if everyone is super cool with literal Death Pits, they don't run for free. And not everyone will be cool with watching their entire family die, which will mean substantial costs in security - and money spent on security, that's just setting money on fire, that money doesn't work any more. I know they've batted around the ideas of "compliance collars" and suchlike for the guys running the Death Pits, but I haven't seen anything that wouldn't be ultimately defeated by a typical zoo chimpanzee, let alone a psychopathic Delta Force guy with more advanced degrees than your entire family. He will not be pleased with your "compliance collar" thing. And the brain control chips they've been trying to get working . . well, they're not ready yet. You'll just make the Delta Force guy even crazier .
- dofm 3mo agoThe labour needs to be eliminated — essentially nobody in the economy paying them for an equivalent job — for enough money to be freed up for it to work. But then these people who are either unemployed or job sharing some remaining work don’t have the money to buy the products of all the AI companies’ customers. At the necessary scale it will trigger economic demand collapse. The whole idea is impossible.
- meangenehackman 3mo agoIt is far better for society when companies like Nvidia spend their money rather horde it like Apple. Nobody (including the dragon) benefits from sitting on piles of gold.
- pinkyboy 3mo agoApple is a $5t company that has $45b cash-on-hand. Your post is "cute", but 3 or 4 months of operating cash isn't a great example of "sitting on piles of gold".
- joaquieneCnix 3mo agoDRAM will get to the moon before we get ...
- mhitza 3mo agoAlternative source https://finance.yahoo.com/technology/ai/articles/nvidia-plans-750-billion-spending-160906231.html https://finance.yahoo.com/technology/ai/articles/nvidia-plan... > The concern is familiar: NVIDIA money funds customers who then buy NVIDIA chips.
- NegatioN 3mo agohttps://archive.is/epMTs https://archive.is/epMTs
- randyrand 3mo agoCircular is a dumb way to describe it IMO, because it's not like both parties end up in the same place. Nvidia is making trades for people to buy their GPUs. Sometimes companies are trading stock for GPUs, sometimes money, other times something else. In summary, Nvidia is selling GPUs.
- georgemcbay 3mo agoIts only a problem if you think about it, just don't think about it and no problem!
- randyrand 3mo agoIt's only a problem if you dont think about it.
- Marciplan 3mo agoare you just heavily invested in Nvidia to not see this as problematic?
- ar_lan 3mo agoWe all are, mostly.
- Analemma_ 3mo agoThey're selling GPUs in exchange for scrip which may or may not be able to pay Nvidia's operating expenses depending on whether AI has a profitable business model. This isn't hard to understand.
- thewebguyd 3mo agoNo, Nvidia is getting paid. Nvidia puts down a fraction of equity cash, and the recipients are taking that to PE to finance debt, using the GPUs as collateral. So Nvidia pays $1B, receiving company uses it to secure $10B in debt and buys $10B worth of GPUs. Nvidia gets real cash, pays TSMC, etc. The people in real trouble are companies like CoreWeave, Oracle, etc. that took an IOU from OpenAI (for example) to start a buildout, entirely debt financed. It works out so long as demand keeps going up, but the moment the music stops and that debt comes due and there's no revenue to pay it, game over. Nvidia's concern isn't not actually getting paid, it's being faced with a glut of cheap, depreciated GPUs flooding the market impacting their future revenue. They'll live. But OpenAI, not being able to pay CoreWeave, for example, that IOU, and then private credit coming for the debt payments from CoreWeave, is what would start the chain reaction. We may actually get to live to see Oracle fall.
- gla67890543 3mo agoOPEN AI is living true to their name and foundation principles. Non profit and NO PROFIT, lol.
- fsuts 3mo agoI imagine nvidia is securing these loans on the hardware being bought? So if the company defaults they can take the GPUs and servers etc and sell those.
- vanuatu 3mo agocan someone explain why this is actually bad? nvidia spends X amount to invest in data centres or investments on the agreement that the counterparty spends Y amount back, the net delta is the actual amount of value being transferred aka Nvidia sells chips as usual despite the high numbers of X and Y? The frontier labs do not have enough chips to meet demand, and AI demand is ferocious and climbing, so I'm not sure what the story is here
- nickff 3mo agoThe problem is that when a vendor finances their customers, they can create the illusion of 'real' demand for their product, when most of the the end-users are only actually using something because it's cheap. When the vendor runs low on cash and starts requiring payment, the customer may not be able to afford it, taking both vendor and customer down, and leaving the end-users who have a real need, and were willing to pay sustainable prices without any options.
- vanuatu 3mo agothat makes sense to me in a conceptual sense however inference is very profitable and plummeting in cost for a given point on the intelligence curve, and nvidia gpus can serve different models so they are protected post-buildout
- nickff 3mo agoYou are describing the justification that NVDA is using to explain their behavior; they see it as something of a 'bridge-loan' until the LLM business model reaches steady-state. The problem is that this explanation has been used for many bubbles, where companies mis-categorize ongoing costs as one-time expenses.
- surgical_fire 3mo ago> however inference is very profitable Is there any actual evidence of that?
- javier2 3mo ago
- returnInfinity 3mo agoif demand for "safe" tokens explodes, this is a no brainier if open source throws a wrench into the frontier revenue growth, then its gonna be biggest bubble explosion
- russlan 3mo ago[flagged]
- keeda 3mo agoNvidia had a free cash flow last quarter of $48.5 billion, a 36% quarter-over-quarter increase. $750B does not seem that huge in comparison. (Yes, the gravy train could theoretically stop anytime, but that still seems like a large but localized unwind rather than a wider economic crash.) If you were NVDA and had that much cash on hand and wanted to grow your business, where would you put it?
- jurschreuder 3mo agoIf anything this means that the insane amounts spent on AI are just mostly virtual speculative stock deals and in reality the amount spent in AI is kinda normal.
- obligor_io 3mo ago[flagged]