alt Hacker NewsCircular 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.
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Yeah, the "circular" language is obviously intended to imply unsustainability, as a system without external inputs must eventually run down. But this system is intended to have external inputs, revenue from customers that buy the services of the data centers. So the fundamental issue is just whether there will be enough such demand to justify the scale of the build-out.
These deals give Nvidia more exposure to that, in both directions. Certainly Nvidia shareholders should be cognizant of this. But nothing structurally problematic is occurring here.
They'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.
Its only a problem if you think about it, just don't think about it and no problem!
Nope. The simplest rebuttal to all of this is: why dont they pay cash?
are you just heavily invested in Nvidia to not see this as problematic?
Looks like you discovered an infinite money glitch! As long as you’re selling things at a profit, all you need to do is take those profits and give them to your customers to buy more things, repeat the loop a few times and you can become a billionaire food vlogger just like Jensen
Right. The risk isn't accounting fraud, its the equity-to-debt loop that relies on all these companies making "enough money to pay it back someday."
Nvidia invests, that equity check gets used to secure 10x it in debt with the GPUs as collateral, and then they buy the chips.
Nvidia gets paid, so they don't hold the debt liability. But, if AI revenue doesn't cover those debt payments before the GPUs depreciate, the loop starts to unravel, and fast. CoreWeave, Oracle, all the "neoclouds" etc. will blow up, and there could potentially be a ton of PE debt that is now under-collateralized due to depreciation, causing a pretty big haircut to basically all of private credit.