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Nvidia dismisses "circular financing", says every $1 it invests brings back $100
- Eddy_Viscosity2 21d ago10,000% growth! No way that could be wild claim! How dare we doubt them.
- alexdns 21d agonvidia invests $1 in AI company , datacenters with GPUs , AI company / datacenters buy $x worth of GPUs from NVIDIA , in a circle
- david-gpu 21d agoIsn't vendor financing a common business practice to finance the cost of equipment? What makes it nefarious in this instance?
- crote 21d agoBecause it isn't a simple loan, and the value of the equipment itself as collateral is highly doubtful anyways. Nvidia is investing in their customers by buying their stock. Nvidia is directly buying compute from their customers. Nvidia is making "if you can't find a customer, we'll take all of your capacity" deals. Nvidia is making a ton of fake huge-number deals which are supposed to be realized over time but most likely never will. They are doing everything they can to make that customer look like a healthy and valuable business which everyone should invest in and loan money to - which in turn flows directly back to Nvidia to buy GPUs and boost their revenue. They are essentially creating sockpuppets to keep external money flowing in so they can keep the money printer running.
- behnamoh 21d agoNvidia is full of shit. Leatherman thinks Astra = AGI.
- nicman23 21d agoare those 100$ in the room with us right now
- dgellow 21d agoThey are definitely in NVIDIA’s own rooms! It’s like, they invest $1 in AI companies, that pay back NVIDIA $100 for GPUs. If you draw the lines you will see something that looks a bit like an ellipse. Or maybe a boomerang path. Or like, a 2d sphere. A bit frustrating we don’t have a simpler word for such a shape
- marginalia_nu 21d agoI asked Astra to explain this and it thought for a really long time and then came back with this: https://www.marginalia.nu/junk/financing.png https://www.marginalia.nu/junk/financing.png
- dgellow 21d agoThat’s hilarious, I wish HN rendered pictures just for that one!
- marginalia_nu 21d agoEmbedding the image would have ruined the comedic timing and made it less funny. Comedy is mostly about subverting expectations. If your eyes are drawn to the punchline before you read the set up it doesn't work.
- raphman 20d agoI hope that this is temporally and spatially far away enough. In order to fully appreciate the joke, one should have read https://openai.com/index/navier-stokes-solution/ https://openai.com/index/navier-stokes-solution/ (I didn't beforehand).
- someguyiguess 21d ago
- youoy 21d agoWoah, better than Madoff! How can i give him money?
- wartywhoa23 21d agoThose $99, where do they come from?
- rwmj 21d agoShush there! Don't ask any difficult questions!
- OroPla 21d agoThe Fed is printing them. Just like they print all other money. From the article: > I put in one, and a hundred comes back.” > The figure was rhetorical, not a disclosed 100-times investment return. There's a lot more words in there, but it doesn't seem to say anything else.
- someguyiguess 21d agoPrinting money doesn’t create value. It dilutes value.
- OroPla 21d agoIt does neither, as money is simply a representation of wealth. Increasing the supply of money without increasing the wealth will mean you'll have more money representing the same wealth. This is called inflation. But the wealth, or value if you will, remains unaffected. Money isn't wealth. It's just a representation. It used to be wealth back in the days before paper money, when a coin actually had the value it said it had.
- brianpane 21d agohttps://www.youtube.com/watch?v=tO5sxLapAts https://www.youtube.com/watch?v=tO5sxLapAts
- __patchbit__ 21d agoThe future we want. Not the wasteful F-35 'Fat Amy' lemon future noone except the fighterjet mafia wants..
- iammjm 21d agoWhere are those 99$ coming from? Who is actually paying this money? Because it seems like so far everybody is losing money with no reversal of this trend in sight
- marginalia_nu 21d agoInflated valuations, mostly.
- petcat 21d agoThe current valuations are only inflated until they're not. Especially if the big American labs can convince the US government to work out a joint "AI non-proliferation" agreement with China which will allow both countries to essentially carve up and techno-colonize the rest of the world without any other competition except between themselves. We're already seeing signs of this strategy from Open AI and Anthropic warning about the dangers of AI and the need for safety regulations. None of that stuff matters if China is not also on board with it.
- marginalia_nu 21d ago> The current valuations are only inflated until they're not You could say that about any historically inflated valuation all the way back to the tulip mania. Either the expected profit materializes or it doesn't. > We're already seeing signs of this strategy from Open AI and Anthropic warning about the dangers of AI and the need for safety regulations I would read this as a desire to pause training to be able to present a profit in anticipation of the IPO. The major AI labs mad scramble to IPO is if anything a sign that they aren't at all confident in the valuation. If they were they would be no hurry to cash out.
- fc417fc802 21d agoAnd this is the actual problem. I can't see framing it as a ratio as anything other than an attempt to mislead. What do you predict will happen when the market deflates? Whether or not a segment will behave like a line of dominoes and catastrophically implode is the question. As I understand it they are risking that even if the major AI labs fail all the compute capacity that's been built out will remain in demand at sufficiently high prices.
- blitzar 21d agoI don't know about $100 back ... but their profit margin is $0.90 on the gpu that is bought with the $1 they lend / swap for equity + they get ongoing interest / equity stake. Its a mighty fine deal for Nvidia
- vardump 21d agoI first read that "every $1T brings back $100", thinking, wow, is it THAT bad? No, it's very unlikely at this point every $1 Nvidia invests brings back $100. Stating something like that is almost a red flag that things are overheating.
- nerbert 21d agoEvery $1 they invest brings back $100 in their valuation maybe.
- willis936 21d agoBut even that isn't really true since Nvidia P/E was unreasonably high even 4 years ago. So how is this not lying to investors (a thing that is illegal)?
- thousand_nights 21d ago> The figure was rhetorical, not a disclosed 100-times investment return. seems no one is reading the article..
- sajithdilshan 21d ago100$ for every 1$ invested would definitely be branded as a ponzi scheme if it was done by a regular Joe
- andrepd 21d agoReads like satire. "I get 100$ for every 1$ I put in" is exactly the kind of phrase that triggers ponzi alarm bells on anybody reading this x)
- vrganj 21d agoYou see, it's not a circle, it's a pyramid! Just buy in right now and you'll get unprecedented returns! Nothing could possibly go wrong! My name is Charles Ponzi and I approve of this message.
- Flavius 21d agoSo for every trillion that was invested, 100 trillion were made. Got it.
- bhouston 21d agoIt is a bit circular but it also a growing real market. NVIDIA is accelerating the market and also making money. It is a smart strategy on their part. We are not at the top of this trend yet so I do not see this as over investment. I remember the criticism Microsoft got for investing in Facebook/Meta that gave them a whooping $15B valuation and getting 1.7% in 2007. Not all deals will turn out that prescient but a few will and make up for any duds. This is a real market.
- BunsanSpace 21d ago> It is a smart strategy on their part. No, it's a high risk gamble. If the market grows enough they will win the bet, but if the market doesn't or we get a recession that dries up capital they will be holding the bag.
- bhouston 21d ago> No, it's a high risk gamble. Even in a recession I think the shift towards AI would just accelerate since it is usually cheaper than humans. The real risk I feel if what if AI is too successful and there is a lack of human demand because of dropping wages/employment? (Then I wonder if sentient robot demand will make up for it? Although I realize that veers into science fiction futures.)
- someguyiguess 21d agoI think it’s safe to venture into science fiction futures at this point. We have AI and government mass surveillance technology. We’re living in science fiction futures.
- Avicebron 21d ago> If the market grows enough they will win the bet So for this to become true there are some number of jobs that that pay $N salary are replaced completely by LLMs that do the job for $N-0.01? Is that what you mean by "market grows enough"
- s1artibartfast 20d ago
- RugnirViking 21d agoAmazed by these comments? Yes, it seems very possible to me that Nvidia makes a lot of money. They are literally the largest company in the world. Who pays? Only all the companies, desperately raising as much capital as possible, issuing new stock to do it, going for unprecedented investment rounds, burning cash reserves to fund the largest data centre rollout in history. Who builds the things that go into said datacenters? The thing that has also raised in price dramatically in recent years?
- rwmj 21d agoIn a very narrow sense it may be true that Nvidia expects to make some multiple of the money invested (unlikely to be 100x but whatever). But you can't talk about that without talking about the wider economy. If the wider economy, and especially the pension funds putting money into the scheme, cannot sustain this, it'll eventually collapse and then everyone including Nvidia will lose lots and lots of money.
- draw_down 21d ago[dead]
- Ekaros 21d agoIt is always about scale. At scale today's Nvidia does anything is so big that 100x is not anymore reasonable. Or then it is not significant... From sub million to hundreds of millions I could theoretically see. Even tens of millions to billions. And even then I would be extremely skeptical. But with Nvidia we are talking somewhere in the scale at tens or hundreds of billions. And that is actually very large sums of money. Even if it often does not look like it.
- well_ackshually 21d agoThe only metric by which they are the largest company in the world is valuation. There are thousands of companies more important to your daily existence than Jensen's leather jacket factory. They are also talking out of their asses, as they are massively overselling their capacity, and everyone is on a 5 to 10 year backlog.
- DarmokTanagra 21d ago[dead]
- Ekaros 21d agoSo if they just had spare 100 billion they could make 10 trillion? Sounds reasonable and plausible right? Sadly market manipulation is not being prosecuted.
- hyperionultra 21d agoAfter the downfall - it will be prosecutable. Of course before that we (simpletons) will have to pay for those companies to avoid “economic collapse”.
- silverFork 21d agoA la Enron but completely legal. It is not just a circle, it is more like a swirl. Wallstreet invested in Ai Farms to purchase NVDA chips and then NVDA invested in Ai Farms and not only that it is investing in its customer, Anthropic and its IPO.. They are recycling the cash that they harvest from stock markets till it becomes the famous singularity in funding like a financial hurricane.
- JumpCrisscross 21d ago> Enron but completely legal Nvidia's financing is disclosed. Enron lied about its schemes. I've also seen zero evidence that Nvidia is extending this credit to related parties to put in sham orders–that was part of Enron's shtick, too.
- silverFork 21d agoThe mechanics are legal but the objective is the same which is buy your own output by manufacturing a demand. I am sure they can buy good lawyers to keep it completely legal.
- nonethewiser 21d agoAre you claiming NVIDIA manufactured the demand for AI?
- silverFork 21d agoYup. Investing in your customer, what is that if it is not buying demand. They get the cash to buy your output.
- JumpCrisscross 21d ago> Investing in your customer, what is that if it is not buying demand It can be manufacturing demand that wouldn't otherwise exist. It can be facilitating demand to come online sooner and smoother. You can't tell which it is by only looking at the transaction; you need to know how many dollars are going into the ecosystem as a whole for purchases of goods and services. Until Anthropic's S-1 lands tomorrow-ish, we won't have that publicly.
- ozgrakkurt 21d agoLike a grade school student claiming they peed for 10 minutes straight yesterday
- fwlr 21d agoIt’s not circular because we put a little bit of money in, and a lot of money comes back Ah yes, it’s not circular, because it’s a pyramid.
- oblio 20d agoWell, technically we could have both, I think that's called "cone".
- hacker_88 21d agoThey sell shovels in the gold rush and invest on the miners as well. The gold is the tokens . As long as the tokens are consumed,they are fine .
- AyanamiKaine 21d agoI always here how Nvidia's investment "scheme" is like previous company X that was destroyed using said scheme. But its quite obvious that while there are some similarities its simply not the same. Most analysis, so it seems, are quite surface. Are there any deeper finical analysis on the investments of Nvidia and how they are financed?
- somepleb 21d agoCisco has entered the chat.
- ulfw 21d agoEvery $1 it invests brings back $100 Mega eyeroll God heavens. It's worse than 2000/2001! Gotta start selling my portfolio
- cmiles8 21d ago[dead]
- wangxili1997 21d ago[flagged]
- haritha-j 21d agoWhere does the $99 come from you ask? Your salaries if AI works (and takes your jobs), and your taxes if it doesn’t (bubble bursts, your taxes bail them out Becasue it’s too big to fail).
- bandrami 21d agoKen Lay would like a word
- jqpabc123 21d ago"Every $1 invested brings back $100" --- Bernie Madoff
- sva_ 21d ago> so why does the stock keep falling When I zoom out to 5 years, it does not look like "keeps falling".
- someguyiguess 21d agoZoom back in
- zug_zug 21d agoI spent a few hours trying to run all the numbers myself from first principles (e.g. sum of all American salaries is 11.7T, plus international), to see what I could come up with. What I came up with was Nvidia is maybe slightly overpriced currently, but a bad stock to buy or hold onto because the risk of it shrinking is significantly higher than the risk of it ever doubling again (and it trades at a tech/growth multiple). The case is far worse for Anthropic/OpenAI who, at current pricing, capture such a tiny slice of the pie it's hard to see how they will stay in business long term.
- xnx 21d agoIsn't most of the financing just another way of expressing discounts and payment plans for very expensive hardware?
- epsteingpt 21d agoAI isn't showing up in S&P 500 company earnings as a line item. proof: https://aiearnings.dev https://aiearnings.dev given the stakes, we'd better hope it starts showing up soon.
- marcosdumay 20d agoIf I'm reading that correctly, then 59% of them claim to plan to use AI, 11% of them claim to use AI and 0 of the AI buyers (absolute number) claim that AI pays for its costs. Is it really that? AI is still heavily subsidized.
- epsteingpt 20d agoCorrect - it could be evolving. Apollo (credit) notes that AI isn't showing up in the bottom line of any companies besides the ones making it right now. This isn't concerning for such a new technology, but if the trend continues it would be fatal. Imagine how many businesses benefitted from the railroads at first - almost none because no one had freight to ship. Same kind of thing - the connective tissue is taking time. But the catastrophic adoption of the technology could be what leads to its downfall.
- scotty79 21d agoNVidia just has the money to overleverage themselves by buying companies in AI industry (coincidentally their own customers). If they put all of their money in the chip business they'd have major problem once someone else makes good enough chips in volume. And Chinese are obviously going to do that very soon. But if NVidia owns comapnies who buy chips it's winning no matter who they buy the chips from. With what NVidia is doing, it's making the ride better for themselves and provide a soft cushion for when it ends. The only way for NVidia to lose is for AI to fail utterly. Which is pretty impossible.
- serbuvlad 21d agoI find that the people who are most concerned about circular financing in the case of AI, are those who fearmonger about deflation and talk about the importance of monetary velocity for the economy. Isn't this a contradiction?
- sottol 21d agoAnything that puts pressures on Nvidia's margins is going to have an outsized effect imo - margins declining from 75% to ~50% would undo all of its projected 2027 growth of 70%. And what about the purported "AI frontier slowdown" - if frontier labs stop pushing better and better models, the main way to grow the pie is more users and that will eventually stop, too. Then providers would probably stop buying new hardware hand-over-fist and move to a slower depreciation-based replacement.
- danny_codes 20d agoOf course, just your normal 10000% return. Pretty typical I’m sure that’s very accurate.
- linchpin_michae 20d ago[flagged]