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> 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

> 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 1mo ago
The 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 1mo ago
  Are you claiming NVIDIA manufactured the demand for AI?
  - silverFork 1mo ago
    Yup. Investing in your customer, what is that if it is not buying demand. They get the cash to buy your output.
    - JumpCrisscross 1mo 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.
  - Avicebron 1mo ago
    Not a lot of people were clamoring for copilot in their outlook. But NVIDIA are giving money to labs so that they will buy their hardware. Manufacturing demand for their hardware, which is used for more AI, which eager PMs stuff into every crevice they can find and call demand.
    - CuriouslyC 1mo ago
      ChatGPT was the fastest growing software of all time not that long ago. Citing a bad AI product as evidence for lack of demand is saying the failure of the Homer car was due to the fact that people don't like automobiles.
      - brazukadev 1mo ago
        Don't need to go far. Sora by the same company was the fastest incineration of dollars in software of all time.
      - oblio 1mo ago
        ChatGPT was the fastest growing gratis software of all time. I wish we still lived in an age where things were sold to cover their costs. My money's on their product having 10% of its current user base if they charged 50 cents per month.
        deleted 1mo ago
        [deleted]
        RussianCow 1mo ago
        Which doesn't matter if they're still not profitable.
        deleted 1mo ago
        [deleted]
        saberience 1mo ago
        You could have said this about Google's Search product... How much would the average normie pay if Google suddenly charged? Sure the user-base would drop. And what? Did Google suddenly become a bad business? I find it funny how people have these strange and hypocritical viewpoints when it comes to OpenAI and Anthropic when the hyperscalars like Google, Amazon etc, followed these exact same kinds of playbooks for years and years.
- JumpCrisscross 1mo ago
  > mechanics are legal but the objective is the same which is buy your own output by manufacturing a demand Eh, I think it's an open question whether OpenAI and Anthropic would be buying GPUs like they are with or without Nvidia's financing. Financing customers' purchases isn't proof per se of demand creation versus demand inducement. Anyone who claims they've seen a certain fact in these financings is deluded or lying.
  - silverFork 1mo ago
    The Ai companies are not really profitable now so they need cash incoming from the skies to grow even more and they are still losing money. Ai farms and much of Ai software world are money sucking machines with assumed profit in future. Their P/E is assumed to be positive in future but it isn't now. The hardware suppliers are making the real money now from the AI hardware pipeline and NVDA is pretty much the center of hardware pipeline sucking most of the cash. In my opinion NVDA knows that the profits from AI have to flow from Ai software to keep the music playing and that it has a lot of competition incoming and so it is funding its customers and buying its own output to circulate the cash towards itself to make as much money as possible now. It has no other choice in reality.
    - JumpCrisscross 1mo ago
      > Ai companies are not really profitable now You need to be more specific, because there are absolutely sections of the AI economy that are clearly and presently profitable. > Ai farms and much of Ai software world are money sucking machines If AI farms refers to datacenters, plenty of existing ones are currently profitable.
      - silverFork 1mo ago
        Their assets are depreciating faster than they can pay it off and that means that the profits are pretty much a temporary illusion in my opinion that is because the so called ai chips have short lifespans and don't age gracefully. What happens when you buy a car and say use it for delivery for income for example and then the engine dies. You have to buy a new car and pay for the old one as well.
- CuriouslyC 1mo ago
  I'd argue that in this case, Nvidia is accelerating a flywheel to try and reach critical velocity rather than manufacturing demand.
  - oblio 1mo ago
    > I'd argue that in this case, Nvidia is accelerating a flywheel to try and reach critical velocity rather than manufacturing demand. I'd argue that in this case, if the flywheel never reaches critical velocity, they are manufacturing demand.
    - fuzzfactor 1mo ago
      Well, Nvidia started out as a manufacturer first & foremost. Maybe I'm in the middle of the road :) Seems like economy, scale, velocity, and even "critical mass" are related in some way, but not the same at all. I would say it's quite possible that economies of scale can go from positive to negative without much warning. I think it's most sustainable financially when the underlying "economy" is what drives the resulting scale-up, which usually does occur in phases or stages where each successful milestone informs the next campaign more realistically than you can get any other way. As market demand grows beyond baseline sustainability it becomes less costly to serve each additional customer this way. The opposite effect could occur if meeting lofty scaling goals requires an ever increasing cost of customer acquisition beyond the point of unmet initial pending demand. When the scaling process itself is what drives the activity without being limited by the actual buying power of the ultimate consumers at any one point, things can really get ahead of themselves. Accounting practices can be so diverse that the only way to be sure whether scaling ahead of the curve was actually "economical" is after liquidation ends up occurring. Unfortunately, liquidation of one kind or another is more likely when the scale is based on hyperbolic dreams rather than more reasonably optimistic estimates. But who's to say which is which, and the continuum between them is blurry enough without any highly interested parties trying to muddy the waters even further. Who even knows if they've given it as much thought as it deserves, or if more clear-headed thinking could be the primary factor given what there is to work with :\ Hence the designation "Hyper-Scalers".
  - 1mo ago
- nl 1mo ago
  Vendor financing[1] has a long and successful history. Here's a good WSJ article from 2001 about the practice and risks[2], written after the DotCom crash in March 2000. There is nothing illicit or illegal in anyway about what NVidia is doing. It's reasonable business practice, and people on HN are simply ignorant to think otherwise. NVidia is very aware of the risks it entails, but has the money to cover those risks. [1] https://en.wikipedia.org/wiki/Vendor_finance https://en.wikipedia.org/wiki/Vendor_finance [2] https://archive.is/mOIfg https://archive.is/mOIfg
  - stymaar 1mo ago
    > There is nothing illicit or illegal Which is exactly the point of the person you're responding to. What part of “but completely legal” isn't clear enough?
    - JumpCrisscross 1mo ago
      Enron was illegal but also a sham. The point is we have no evidence Nvidia's financing is a sham. It could be. And if it is, it's a huge problem. But the shammiest parts of what Enron did do not apply to Nvidia, which makes the comparison a bit like saying OP is Hannibal Lecter but legal while glossing over the fact that OP never murdered anyone but once drank red wine. (Also note that illegal != illicit.)
    - nl 1mo ago
      Their implication ("A la Enron", "they can buy good lawyers to keep it completely legal") that there is something illicit or wrong in what NVidia is doing. The OP clearly is implying that it should be illegal for some reason. This is wrong - not only is it nothing like Enron (!?) but it's a great way for both NVidia and the companies building on them to build what they want.
  - ElProlactin 1mo ago
    A big problem in discussions about Nvidia is that people can't distinguish between: 1. The equity investments Nvidia has made in its customers. 2. The guarantees/backstops it has extended to some of its customers. 3. Vendor financing. The vendor financing is the least interesting of the bunch. Nvidia has already disclosed that when it provides vendor financing, the average customer pays in less than 60 days. These are not long-term financing arrangements and virtually every big company sells on these type of terms (net-30, net-60, etc.). The equity investments and guarantees are where there is room for legitimate debate.
weird-eye-issue 1mo ago
Right, that's why it's legal. We all get that
- JumpCrisscross 1mo ago
  > that's why it's legal Which is a fundamental difference. When Apple extends me credit to buy an iPhone, that isn't circular financing in a problematic way. I was buying the phone anyway, the financing just made it easier.
  - mschuster91 1mo ago
    It's still questionable. Similar to car manufacturers or IKEA, who all have their own banks, Apple has an incentive to hand out credit to people who should not get it, increasing the likelihood of people getting underwater with their debt. Generally, the fact that most non-Boomer people simply don't have the means to even save up for basic consumer goods like cars, furniture or a phone but have to go into debt instead is scary. Our entire economy has become a house of cards.
    - JumpCrisscross 1mo ago
      > still questionable Oh hell yeah. But a lot of folks are treating the existence of customer financing as damning per se. The scale is daunting. But the scale of the entire AI enterprise is massive.
      - jqpabc123 1mo ago
        But the scale of the entire AI enterprise is massive. Yes --- and the scale of the money being set on fire is epic. And if/when the burning comes to a screeching halt, the resulting crash wil be likewise.
      - mschuster91 1mo ago
        > But a lot of folks are treating the existence of customer financing as damning per se. Yeah because it's gotten completely predatory. That is what people are getting ever more pissed off about - advertising, social media and gamification (have you seen the ads for Tiktok, Whatnot, Wish and whatever else goes with "live shopping" recently?) leads people to go way deeper into credit than they can afford.
jqpabc123 1mo ago
I've also seen zero evidence that Nvidia is extending this credit to related parties to put in sham orders Have you bothered to look at the finances of Nvidia's AI clients? None of them are making any money. They're borrowing money they don't have in oder to buy from Nvidia. And now some of this money is coming from Nvidia itself. In a round about way, Nvidia is buying it's own product. It's pretty clear that this sort of thing can't continue indefinitely --- just like any Ponzi scheme.
- JumpCrisscross 1mo ago
  > None of them are making any money Who are you thinking of? Because yes, I have, and they're not in line with the YouTube influencer consensus.
  - jqpabc123 1mo ago
    Who are you thinking of? All the "frontier" AI vendors are borrowing money to invest in AI (and buy from Nvidia). None of these Nvidia customers are actually making money from it. Anthropic and OpenAI are two cash burning machines that Nvidia has invested billions into --- so they can continue buying from Nvidia. Bottom line: A lot (if not most) of Nvidia's cash flow is borrowed money --- and some of it is borrowed from Nvidia itself. Some of it isn't even "cash flow". It's contract futures being counted as cash flow --- a la Enron accounting.
    - JumpCrisscross 1mo ago
      > Anthropic and OpenAI are two cash burning machines What is your source for Anthropic being cash-flow negative?
      - jqpabc123 1mo ago
        https://aitoolsrecap.com/Blog/anthropic-first-profit-2026-revenue-breakdown https://aitoolsrecap.com/Blog/anthropic-first-profit-2026-re... On a GAAP basis (including stock compensation), Anthropic is likely still unprofitable. At the same time they gushed about a small quarterly profit using "Enron" accounting, they borrowed $30 billion more. And this is just the tip of the "Enron" game being played here. By utilizing these structured finance vehicles, Anthropic has sequestered massive hardware deployments entirely off its corporate balance sheet. https://finance.yahoo.com/technology/ai/articles/anthropic-spvs-stack-71-billion-000514097.html https://finance.yahoo.com/technology/ai/articles/anthropic-s...
cmiles8 1mo ago
Within the whole industry (beyond Nvidia) this is starting to look a lot more and more like Enron. It does appear “legal” but the special purposes vehicles and off balance sheet commitments are having the same net effect. Convincing everyone things are fine while hoping they don’t notice the massive liabilities building up that are kept out of reporting. If you haven’t read “Smartest guys in the room” it’s important reading now as it’s scary similar to what’s going on now across AI. Nobody has alleged anything illegal but the net effect on building a house of cards in the AI bubble can be the same. And that gap in where people are watching (AI company press releases or the creative accounting going on) explains why those watching this are saying “oh no, we’ve seen this movie before” when others are blinding all rah rah about the AI bubble going on forever.
fyredge 1mo ago
Enron's mistake was doing it too early. Nvidia investing in AI labs to use their own chips falls under anti trust, but I don't think the latest administration is interested in investigating it.

silverFork 1mo ago

The 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 1mo ago
Are you claiming NVIDIA manufactured the demand for AI?
- silverFork 1mo ago
  Yup. Investing in your customer, what is that if it is not buying demand. They get the cash to buy your output.
  - JumpCrisscross 1mo 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.
- Avicebron 1mo ago
  Not a lot of people were clamoring for copilot in their outlook. But NVIDIA are giving money to labs so that they will buy their hardware. Manufacturing demand for their hardware, which is used for more AI, which eager PMs stuff into every crevice they can find and call demand.
  - CuriouslyC 1mo ago
    ChatGPT was the fastest growing software of all time not that long ago. Citing a bad AI product as evidence for lack of demand is saying the failure of the Homer car was due to the fact that people don't like automobiles.
    - brazukadev 1mo ago
      Don't need to go far. Sora by the same company was the fastest incineration of dollars in software of all time.
    - oblio 1mo ago
      ChatGPT was the fastest growing gratis software of all time. I wish we still lived in an age where things were sold to cover their costs. My money's on their product having 10% of its current user base if they charged 50 cents per month.
      - deleted 1mo ago
        [deleted]
        RussianCow 1mo ago
        Which doesn't matter if they're still not profitable.
      - deleted 1mo ago
        [deleted]
      - saberience 1mo ago
        You could have said this about Google's Search product... How much would the average normie pay if Google suddenly charged? Sure the user-base would drop. And what? Did Google suddenly become a bad business? I find it funny how people have these strange and hypocritical viewpoints when it comes to OpenAI and Anthropic when the hyperscalars like Google, Amazon etc, followed these exact same kinds of playbooks for years and years.
JumpCrisscross 1mo ago
> mechanics are legal but the objective is the same which is buy your own output by manufacturing a demand Eh, I think it's an open question whether OpenAI and Anthropic would be buying GPUs like they are with or without Nvidia's financing. Financing customers' purchases isn't proof per se of demand creation versus demand inducement. Anyone who claims they've seen a certain fact in these financings is deluded or lying.
- silverFork 1mo ago
  The Ai companies are not really profitable now so they need cash incoming from the skies to grow even more and they are still losing money. Ai farms and much of Ai software world are money sucking machines with assumed profit in future. Their P/E is assumed to be positive in future but it isn't now. The hardware suppliers are making the real money now from the AI hardware pipeline and NVDA is pretty much the center of hardware pipeline sucking most of the cash. In my opinion NVDA knows that the profits from AI have to flow from Ai software to keep the music playing and that it has a lot of competition incoming and so it is funding its customers and buying its own output to circulate the cash towards itself to make as much money as possible now. It has no other choice in reality.
  - JumpCrisscross 1mo ago
    > Ai companies are not really profitable now You need to be more specific, because there are absolutely sections of the AI economy that are clearly and presently profitable. > Ai farms and much of Ai software world are money sucking machines If AI farms refers to datacenters, plenty of existing ones are currently profitable.
    - silverFork 1mo ago
      Their assets are depreciating faster than they can pay it off and that means that the profits are pretty much a temporary illusion in my opinion that is because the so called ai chips have short lifespans and don't age gracefully. What happens when you buy a car and say use it for delivery for income for example and then the engine dies. You have to buy a new car and pay for the old one as well.
CuriouslyC 1mo ago
I'd argue that in this case, Nvidia is accelerating a flywheel to try and reach critical velocity rather than manufacturing demand.
- oblio 1mo ago
  > I'd argue that in this case, Nvidia is accelerating a flywheel to try and reach critical velocity rather than manufacturing demand. I'd argue that in this case, if the flywheel never reaches critical velocity, they are manufacturing demand.
  - fuzzfactor 1mo ago
    Well, Nvidia started out as a manufacturer first & foremost. Maybe I'm in the middle of the road :) Seems like economy, scale, velocity, and even "critical mass" are related in some way, but not the same at all. I would say it's quite possible that economies of scale can go from positive to negative without much warning. I think it's most sustainable financially when the underlying "economy" is what drives the resulting scale-up, which usually does occur in phases or stages where each successful milestone informs the next campaign more realistically than you can get any other way. As market demand grows beyond baseline sustainability it becomes less costly to serve each additional customer this way. The opposite effect could occur if meeting lofty scaling goals requires an ever increasing cost of customer acquisition beyond the point of unmet initial pending demand. When the scaling process itself is what drives the activity without being limited by the actual buying power of the ultimate consumers at any one point, things can really get ahead of themselves. Accounting practices can be so diverse that the only way to be sure whether scaling ahead of the curve was actually "economical" is after liquidation ends up occurring. Unfortunately, liquidation of one kind or another is more likely when the scale is based on hyperbolic dreams rather than more reasonably optimistic estimates. But who's to say which is which, and the continuum between them is blurry enough without any highly interested parties trying to muddy the waters even further. Who even knows if they've given it as much thought as it deserves, or if more clear-headed thinking could be the primary factor given what there is to work with :\ Hence the designation "Hyper-Scalers".
- 1mo ago
nl 1mo ago
Vendor financing[1] has a long and successful history. Here's a good WSJ article from 2001 about the practice and risks[2], written after the DotCom crash in March 2000. There is nothing illicit or illegal in anyway about what NVidia is doing. It's reasonable business practice, and people on HN are simply ignorant to think otherwise. NVidia is very aware of the risks it entails, but has the money to cover those risks. [1] https://en.wikipedia.org/wiki/Vendor_finance https://en.wikipedia.org/wiki/Vendor_finance [2] https://archive.is/mOIfg https://archive.is/mOIfg
- stymaar 1mo ago
  > There is nothing illicit or illegal Which is exactly the point of the person you're responding to. What part of “but completely legal” isn't clear enough?
  - JumpCrisscross 1mo ago
    Enron was illegal but also a sham. The point is we have no evidence Nvidia's financing is a sham. It could be. And if it is, it's a huge problem. But the shammiest parts of what Enron did do not apply to Nvidia, which makes the comparison a bit like saying OP is Hannibal Lecter but legal while glossing over the fact that OP never murdered anyone but once drank red wine. (Also note that illegal != illicit.)
  - nl 1mo ago
    Their implication ("A la Enron", "they can buy good lawyers to keep it completely legal") that there is something illicit or wrong in what NVidia is doing. The OP clearly is implying that it should be illegal for some reason. This is wrong - not only is it nothing like Enron (!?) but it's a great way for both NVidia and the companies building on them to build what they want.
- ElProlactin 1mo ago
  A big problem in discussions about Nvidia is that people can't distinguish between: 1. The equity investments Nvidia has made in its customers. 2. The guarantees/backstops it has extended to some of its customers. 3. Vendor financing. The vendor financing is the least interesting of the bunch. Nvidia has already disclosed that when it provides vendor financing, the average customer pays in less than 60 days. These are not long-term financing arrangements and virtually every big company sells on these type of terms (net-30, net-60, etc.). The equity investments and guarantees are where there is room for legitimate debate.

weird-eye-issue 1mo ago

Right, that's why it's legal. We all get that

JumpCrisscross 1mo ago
> that's why it's legal Which is a fundamental difference. When Apple extends me credit to buy an iPhone, that isn't circular financing in a problematic way. I was buying the phone anyway, the financing just made it easier.
- mschuster91 1mo ago
  It's still questionable. Similar to car manufacturers or IKEA, who all have their own banks, Apple has an incentive to hand out credit to people who should not get it, increasing the likelihood of people getting underwater with their debt. Generally, the fact that most non-Boomer people simply don't have the means to even save up for basic consumer goods like cars, furniture or a phone but have to go into debt instead is scary. Our entire economy has become a house of cards.
  - JumpCrisscross 1mo ago
    > still questionable Oh hell yeah. But a lot of folks are treating the existence of customer financing as damning per se. The scale is daunting. But the scale of the entire AI enterprise is massive.
    - jqpabc123 1mo ago
      But the scale of the entire AI enterprise is massive. Yes --- and the scale of the money being set on fire is epic. And if/when the burning comes to a screeching halt, the resulting crash wil be likewise.
    - mschuster91 1mo ago
      > But a lot of folks are treating the existence of customer financing as damning per se. Yeah because it's gotten completely predatory. That is what people are getting ever more pissed off about - advertising, social media and gamification (have you seen the ads for Tiktok, Whatnot, Wish and whatever else goes with "live shopping" recently?) leads people to go way deeper into credit than they can afford.

jqpabc123 1mo ago

I've also seen zero evidence that Nvidia is extending this credit to related parties to put in sham orders Have you bothered to look at the finances of Nvidia's AI clients? None of them are making any money. They're borrowing money they don't have in oder to buy from Nvidia. And now some of this money is coming from Nvidia itself. In a round about way, Nvidia is buying it's own product. It's pretty clear that this sort of thing can't continue indefinitely --- just like any Ponzi scheme.

JumpCrisscross 1mo ago
> None of them are making any money Who are you thinking of? Because yes, I have, and they're not in line with the YouTube influencer consensus.
- jqpabc123 1mo ago
  Who are you thinking of? All the "frontier" AI vendors are borrowing money to invest in AI (and buy from Nvidia). None of these Nvidia customers are actually making money from it. Anthropic and OpenAI are two cash burning machines that Nvidia has invested billions into --- so they can continue buying from Nvidia. Bottom line: A lot (if not most) of Nvidia's cash flow is borrowed money --- and some of it is borrowed from Nvidia itself. Some of it isn't even "cash flow". It's contract futures being counted as cash flow --- a la Enron accounting.
  - JumpCrisscross 1mo ago
    > Anthropic and OpenAI are two cash burning machines What is your source for Anthropic being cash-flow negative?
    - jqpabc123 1mo ago
      https://aitoolsrecap.com/Blog/anthropic-first-profit-2026-revenue-breakdown https://aitoolsrecap.com/Blog/anthropic-first-profit-2026-re... On a GAAP basis (including stock compensation), Anthropic is likely still unprofitable. At the same time they gushed about a small quarterly profit using "Enron" accounting, they borrowed $30 billion more. And this is just the tip of the "Enron" game being played here. By utilizing these structured finance vehicles, Anthropic has sequestered massive hardware deployments entirely off its corporate balance sheet. https://finance.yahoo.com/technology/ai/articles/anthropic-spvs-stack-71-billion-000514097.html https://finance.yahoo.com/technology/ai/articles/anthropic-s...

cmiles8 1mo ago

Within the whole industry (beyond Nvidia) this is starting to look a lot more and more like Enron. It does appear “legal” but the special purposes vehicles and off balance sheet commitments are having the same net effect. Convincing everyone things are fine while hoping they don’t notice the massive liabilities building up that are kept out of reporting. If you haven’t read “Smartest guys in the room” it’s important reading now as it’s scary similar to what’s going on now across AI. Nobody has alleged anything illegal but the net effect on building a house of cards in the AI bubble can be the same. And that gap in where people are watching (AI company press releases or the creative accounting going on) explains why those watching this are saying “oh no, we’ve seen this movie before” when others are blinding all rah rah about the AI bubble going on forever.

fyredge 1mo ago

Enron's mistake was doing it too early. Nvidia investing in AI labs to use their own chips falls under anti trust, but I don't think the latest administration is interested in investigating it.