Because 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.
They are definitely in NVIDIA’s own rooms! It’s like, they invest $1 in AI companies, that pay back NVIDIA $100 for GPUs. If you draw the lines you will see something that looks a bit like an ellipse. Or maybe a boomerang path. Or like, a 2d sphere. A bit frustrating we don’t have a simpler word for such a shape
It does neither, as money is simply a representation of wealth. Increasing the supply of money without increasing the wealth will mean you'll have more money representing the same wealth. This is called inflation.
But the wealth, or value if you will, remains unaffected.
Money isn't wealth. It's just a representation. It used to be wealth back in the days before paper money, when a coin actually had the value it said it had.
Where are those 99$ 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
The 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.
> 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.
And 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.
Well, it is. Thermodynamics. Earth is pretty much a closed system, except for the sun.
So for example if you invest $100 in a farm and get a return of 10%, where does that come from? The nutrients in the soil, the effort expended by the workers, and the power of the sun to turn seeds into food. All value comes either from finite resources in the ground (nuclear, oil, ...), from solar power, or from human effort (work, innovations, etc.)
So can you trace back Nvidia's incredible 10000% return on investment to any of these sources? Which ones?
But it seems this "economic value" is often created by depleting actual physical resources (e.g. people's health, clean air and water), usually resources belonging someone other than the person capturing the "value".
It's not that simple. Of course there is inflation but in the long run in history, real money has increased massively. We have give opportunity of education to almost everyone, abolished slavery, given food and basic medicine to almost everyone. 100 years back having all of these sounded like a perfect world.
If this isn't a house of cards, AI companies' customers. The companies and individauls ponying up for a Claude subscription or compute through OpenRouter.
Customer financing isn't inherently fucked. It's just highly suspect at the scale Nvidia's doing it. There was another thread where I noted that Nvidia's investments are literally monetarily significant, to the point that I expect them to start being directly referenced in the Fed's beige book [1].
Money flowing from the rest of the economy means money no longer being spent on something else. Assuming for the moment it's not all a big circular inflationary scheme, what exactly is being cut back on to fund this infinite spend on AI inference?
Any one actor has finite cash flow (plus their cash-on-hand buffer). Directing cashflow towards inference necessarily directs it away from something else. Either these companies are spending less on something else, or they are returning less profit.
> Where are those 99$ coming from? Who is actually paying this money?
Companies who pay 99$ to make >99$ in return. I am not saying it works in all cases but that's the idea when you pay for stuff as a Company.
> Because it seems like so far everybody is losing money with no reversal of this trend in sight
I am not sure what you are seeing. Anthropic (as one of only two major companies that do just AI) is starting to return profits, while demand for AI is accelerating and, clearly, compute is maxed out. And I mean: On the entire planet. They are turning profits despite being in full buildout mode.
You, when their circular financing scheme fails and you're the one left holding the bag as your government says "they're too important to let them fail".
This month I spent $50 on OpenRouter credits. I find it very useful for coding assistance (not coding per se). It's $50 that I never spent before on this kind of service. That's what we call growth - it quite literally came out of nowhere.
Your $50 isn't enough to sustain trillions of dollars in CapEx investments. This investment cycle - at this scale - only makes sense if within the next 5 years AI replaces something crazy like 5-10% of jobs, if not more. Not changes, replaces completely.
It's the marketing they were doing all the time that AI will replace developers and other jobs, then the companies started this bullshit firing thousands of people without really thinking through. It's more sane to advertise that AI will augment us and I guess if they followed this path a more sustainable growth is expected to happen!
I merely pointed out, that there is real growth behind this - 50$ from my wallet went to this, that did not go towards it at any point in the past. Your argument that my 50$ is not enough is duly noted, but also intellectually lazy.
This month I reduced my spend on cloud AI and started using local models as primary - it's maybe 2 or 4 times slower for some things but it still is getting the job done just fine. I talked to a friend of mine who's been doing the same running smaller Qwen models locally for coding.
I 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.
I 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.
But 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)?
+20% is a sizeable return, but I don't think anyone would look at me right if I made such an investment and then said "I earned $100 for every $1 invested". This is a mathematical statement with concrete numbers, you can't use it as a figure of speech.
They also said that theur hardware scales faster than Moore's law, when in reality it is way slower than Moore's law. Which I guess at least is a good thing for hyperscalars because it helps with their decision to write off their GPUs over a much longer period.
But still, it seems that billionaires are lying left and right. It isn't just Elon.
they're talking about book value, which is all the AAR garbage VC's throw around with their infinite TAMs and all the other clutches of bullshit capitalists need to put in their nests to make themselves feel like they arn't just very complex parasites.
So, in one aspect, like the Matrix, they're not lying: they litterally see that on the paper they're reading from.
But like in the matrix, they just need to be unplugged from the bullshit machine to recognize that this money doesn't exist in the real world.
Scientists, particularly the ones who get ragged on, you know, social scientists, are now well aware that no matter how well any given social goal works in the lab; no matter how much pscyhology they evaluate, depend on, etc, what matters is real world implementation.
Thier sheets of cash raining in from some future valuation simply do not exist in a vacuum, but they want to pretend it does.
So we're litterally watching capitalists look at their piece of meat inside the matrix, and telling us: they do not care that it doesn't actually exists, because on the Capitalism ledger, it feels like real meat.
sure, as long things go up, smart. when things no longer go up, they will take the whole economy down with them akin to the banking crisis in 2008 or the dotcom bubble before that (which both had far less circular incestuous activity going on) and will shamelessly act surprised after the fact.
as long as things go up people conveniently ignore the lessons from the past.
we are long overdue for a correction and given the fear mongering oligopoly shenanigans we must be very close.
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?
In 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.
It 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.
The 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.
So if they just had spare 100 billion they could make 10 trillion? Sounds reasonable and plausible right? Sadly market manipulation is not being prosecuted.
A 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.
Wut? Enron was literally shutting down energy grids in one location to spike prices in another. Way way way more to Enron story than financing to begin with.
There is the Law of Demand. As ai costs plummet, demand increases, just nobody knows the curve shape yet. But could be that cheap inference is how all the AI supply meets the demand
Demand functions (price as a function of quantity demanded) take all kinds of shapes. Veblen goods are the silly example of wrong-sloped demand [1]. The in-vogue example of sigmoid demand, however, is hot water–make hot water (or lighting, for that matter, as another comment today pointed out for LEDs) cheaper and there is a limit to the things we want hot water for. Halving the cost of hot water doesn't induce much new hot-water demand, it increases demand for other goods and services.
Pretty much fanfic. The gap between premise and execution remains limiting. Nvidia has adapted to changing markets better than anyone else up to this date which is what got them to the top in the first place. What makes you think "this time it's different?"
The fallacy I see repeatedly is someone spots a legitimate issue that could hurt Nvidia and by the time they have stood up the challenge to pull that off, Nvidia has pivoted and addressed it. Or more recently, they just acquired it like Groq.
For your premise to hold, you're asserting Nvidia is blind to inference. And yet his public positioning suggests otherwise.
I don't think anyone expects nvidia to "sink". We're concerned that competitive pressures and possible reductions from sky-high demand could make it really hard for nv to justify or maintain their current valuation.
That is, revenues may be unusually cyclically high.
It's going to be hard for frontier labs to keep spending at this rate without starting to make money. And even if they do, lower cost alternatives will likely impact at least to -some- extent how much of that revenue nv gets.
I'm not saying the bet is against Nvidia the company as in how it executes, or enters new markets.
the bet is against the high margins in inference - when other capable players have entered the market as models become commoditized and the inference serving chips as well. Cerebrus ai etc are already showing custom silicon can make a dent while being served cheaper & faster.
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[ 0.22 ms ] story [ 3.1 ms ] threadNvidia 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.
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.
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.
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.
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.
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.
So for example if you invest $100 in a farm and get a return of 10%, where does that come from? The nutrients in the soil, the effort expended by the workers, and the power of the sun to turn seeds into food. All value comes either from finite resources in the ground (nuclear, oil, ...), from solar power, or from human effort (work, innovations, etc.)
So can you trace back Nvidia's incredible 10000% return on investment to any of these sources? Which ones?
Surprised basic stuff is now being questioned.
Value also comes from technology which you seem to suspiciously remove
If this isn't a house of cards, AI companies' customers. The companies and individauls ponying up for a Claude subscription or compute through OpenRouter.
Customer financing isn't inherently fucked. It's just highly suspect at the scale Nvidia's doing it. There was another thread where I noted that Nvidia's investments are literally monetarily significant, to the point that I expect them to start being directly referenced in the Fed's beige book [1].
[1] https://news.ycombinator.com/item?id=49673871
Any one actor has finite cash flow (plus their cash-on-hand buffer). Directing cashflow towards inference necessarily directs it away from something else. Either these companies are spending less on something else, or they are returning less profit.
Companies who pay 99$ to make >99$ in return. I am not saying it works in all cases but that's the idea when you pay for stuff as a Company.
> Because it seems like so far everybody is losing money with no reversal of this trend in sight
I am not sure what you are seeing. Anthropic (as one of only two major companies that do just AI) is starting to return profits, while demand for AI is accelerating and, clearly, compute is maxed out. And I mean: On the entire planet. They are turning profits despite being in full buildout mode.
You, when their circular financing scheme fails and you're the one left holding the bag as your government says "they're too important to let them fail".
And I'd argue the timer started in 2023.
Trust me, there are many other people like me in the world and the enterprises are spending even more.
There is more money flowing into the overall AI ecosystem (by far) than the money Nvidia puts in.
The idea that Nvidia is artificially creating the whole demand is laughable and doesn't add up.
Power tools for knowledge workers, which is what we are getting, isn't enough to save it.
Its a mighty fine deal for Nvidia
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.
seems no one is reading the article..
But still, it seems that billionaires are lying left and right. It isn't just Elon.
So, in one aspect, like the Matrix, they're not lying: they litterally see that on the paper they're reading from.
But like in the matrix, they just need to be unplugged from the bullshit machine to recognize that this money doesn't exist in the real world.
Scientists, particularly the ones who get ragged on, you know, social scientists, are now well aware that no matter how well any given social goal works in the lab; no matter how much pscyhology they evaluate, depend on, etc, what matters is real world implementation.
Thier sheets of cash raining in from some future valuation simply do not exist in a vacuum, but they want to pretend it does.
So we're litterally watching capitalists look at their piece of meat inside the matrix, and telling us: they do not care that it doesn't actually exists, because on the Capitalism ledger, it feels like real meat.
My name is Charles Ponzi and I approve of this message.
We are not at the top of this trend yet so I do not see this as over investment.
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.
And then the following trend will be humanoids and similar and they are barely getting started.
as long as things go up people conveniently ignore the lessons from the past.
we are long overdue for a correction and given the fear mongering oligopoly shenanigans we must be very close.
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?
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.
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.
Not everything is an Enron
Kind of reminds me of the current lack of supply of GPUs and ram to consumers.
who is going to pay back the money nVidia invests in AI labs, AI datacenter companies if the models are being served dirt cheap.
the Chinese are not the only competitor - Amazon with their Trainium, Google with their TPUs etc.
Nvidia might have a moat on training but on serving it's gonna be a blood bath.
But for now they're capturing 80% of all the AI spend so they gonna keep making money.
What is this?
Demand functions (price as a function of quantity demanded) take all kinds of shapes. Veblen goods are the silly example of wrong-sloped demand [1]. The in-vogue example of sigmoid demand, however, is hot water–make hot water (or lighting, for that matter, as another comment today pointed out for LEDs) cheaper and there is a limit to the things we want hot water for. Halving the cost of hot water doesn't induce much new hot-water demand, it increases demand for other goods and services.
[1] https://en.wikipedia.org/wiki/Veblen_good
And this is why the stock remains high. This hasn't even started to make a dent in Nvidia's bottom line yet.
The fallacy I see repeatedly is someone spots a legitimate issue that could hurt Nvidia and by the time they have stood up the challenge to pull that off, Nvidia has pivoted and addressed it. Or more recently, they just acquired it like Groq.
For your premise to hold, you're asserting Nvidia is blind to inference. And yet his public positioning suggests otherwise.
https://qz.com/nvidia-gtc-2026-jensen-huang-keynote-takeaway...
What makes you think they've hit some sort of metaphorical iceberg and all they'll do before they sink is rearrange deck chairs?
That is, revenues may be unusually cyclically high.
It's going to be hard for frontier labs to keep spending at this rate without starting to make money. And even if they do, lower cost alternatives will likely impact at least to -some- extent how much of that revenue nv gets.
the bet is against the high margins in inference - when other capable players have entered the market as models become commoditized and the inference serving chips as well. Cerebrus ai etc are already showing custom silicon can make a dent while being served cheaper & faster.
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?
Mega eyeroll
God heavens. It's worse than 2000/2001!
Gotta start selling my portfolio