80-90% of AI costs are related to inference. Once zAI served their new model entirely on Chinese chips for free then the nVidia jig is up.

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.

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.

Not everything is an Enron

who is "[harvesting cash] from stock markets"? Show me where consumers are being bilked.

NVDA hasn't sold any stock to the public since 1999. If they want to trade shovels for ownership stake in the mines - good for them.

They have issued billions corporate bonds, but buyers like Goldman Sachs and J.P. Morgan have armies of analysis and lawyers.

> 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.

> Where are those 99$ coming from?

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

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.

> 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 a company spends money.

> 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 everything being in full buildout mode.

You do realise it’s not a fixed pie right?

>Who is actually paying this money?

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.

Inflated valuations, mostly.

Every $1 they invest brings back $100 in their valuation maybe.

>every $1 it invests brings back $100

That's great leverage.

As long as it really is true and continues to hold true for all the big players involved then things should be OK.

Though it does imply that there's got to be a long-term source of returns which is 100x richer than Nvidia is now, and that source is willing & able to give up 100x what Nvidia can afford to spend now, or where else is the return actually going to come from?

OTOH if the leverage turns out to be unsustainable, or never was quite as extreme as estimated, then adjustments will have to occur, whether that amounts to carefully planned compensation for any shortcomings, or more abrupt developments which relieve undue pressure.

Reminds me of the kind of stuff Bernie Madoff said before he got busted

Its definitely consistent over the past several years.

> The figure was rhetorical, not a disclosed 100-times investment return.

seems no one is reading the article..

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.

> 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.

Tell us how you know we are not at the top of this trend yet please

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.

After the downfall - it will be prosecutable. Of course before that we (simpletons) will have to pay for those companies to avoid “economic collapse”.

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

Shush there! Don't ask any difficult questions!

https://www.youtube.com/watch?v=tO5sxLapAts

The 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.

The future we want. Not the wasteful F-35 'Fat Amy' lemon future noone except the fighterjet mafia wants..

Isn't vendor financing a common business practice to finance the cost of equipment? What makes it nefarious in this instance?

If 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.

Zoom back in

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.

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.

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.