Nvidia's $750B in Deals Reignite Circular AI Fears

Posted by petethomas 1 hour ago

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Comments

Comment by randyrand 31 minutes ago

Circular 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.

Comment by thewebguyd 16 minutes ago

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.

Comment by no_op 5 minutes ago

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.

Comment by amazingamazing 8 minutes ago

Nope. The simplest rebuttal to all of this is: why dont they pay cash?

Comment by georgemcbay 30 minutes ago

Its only a problem if you think about it, just don't think about it and no problem!

Comment by randyrand 28 minutes ago

It's only a problem if you dont think about it.

Comment by Analemma_ 21 minutes ago

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.

Comment by thewebguyd 9 minutes ago

No, Nvidia is getting paid. Nvidia puts down a fraction of equity cash, and the recipients are taking that to PE to finance debt, using the GPUs as collateral. So Nvidia pays $1B, receiving company uses it to secure $10B in debt and buys $10B worth of GPUs.

Nvidia gets real cash, pays TSMC, etc.

The people in real trouble are companies like CoreWeave, Oracle, etc. that took an IOU from OpenAI (for example) to start a buildout, entirely debt financed. It works out so long as demand keeps going up, but the moment the music stops and that debt comes due and there's no revenue to pay it, game over.

Nvidia's concern isn't not actually getting paid, it's being faced with a glut of cheap, depreciated GPUs flooding the market impacting their future revenue. They'll live.

But OpenAI, not being able to pay CoreWeave, for example, that IOU, and then private credit coming for the debt payments from CoreWeave, is what would start the chain reaction. We may actually get to live to see Oracle fall.

Comment by Marciplan 27 minutes ago

are you just heavily invested in Nvidia to not see this as problematic?

Comment by ar_lan 16 minutes ago

We all are, mostly.

Comment by wonnage 20 minutes ago

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

Comment by mhitza 42 minutes ago

Alternative source https://finance.yahoo.com/technology/ai/articles/nvidia-plan...

> The concern is familiar: NVIDIA money funds customers who then buy NVIDIA chips.

Comment by gla67890543 9 minutes ago

OPEN AI is living true to their name and foundation principles. Non profit and NO PROFIT, lol.

Comment by jdalgetty 1 hour ago

At what point do I start taking money out of my VTI holdings and parking it in cash - there is no way the market keeps going up.

Comment by jshen 49 minutes ago

First, don't park it in actual cash or you'll lose value to inflation which is currently running high. At a minimum put it in treasuries.

Second, trying to time the market is almost always a suboptimal strategy. The question is when will you likely need the money? If you won't need it for 10 years or more, keep it in index funds. Otherwise, treasuries.

Comment by ericpauley 29 minutes ago

Personally I tend to assume anyone talking about VTI knows about the risk-free rate.

Comment by rjh29 4 minutes ago

Historically even if you invest into index at the worst possible time (prior to a crash) and keep holding you still outperform inflation long term. Timing the market is impossible. Just keep an emergency fund in a money market or savings account and hold the rest.

Comment by pianopatrick 2 minutes ago

There is no law that prices must revert to a mean.

The market can keep going up in dollar terms while losing real value if we enter a phase of high inflation.

Comment by fullshark 34 minutes ago

Just need a larger emergency fund to mitigate the risk, especially if you work in tech and you feel the crash would heavily impact your labor earnings (including possibly extended unemployment)

Comment by mohamedkoubaa 4 minutes ago

Market goes up when the dollar crashes you're fine

Comment by scrappyjoe 57 minutes ago

Park it in BRK?

Comment by nickff 55 minutes ago

BRK has been roughly flat since the beginning of 2025; you might be better off in bonds or money markets (depending on your beliefs about near-term inflation).

Comment by bryanlarsen 40 minutes ago

BRK is 40% cash at the moment. I think "roughly flat" is evidence they're performing the strategy the OP wanted.

BRK has stated that they'll buy back in when prices are reasonable again, so it's an automatic "sell-high buy-low" strategy.

Comment by niklasd 46 minutes ago

Not that I have any skills in stock-picking whatsoever, but couldn't the recent lukewarm performance not also be an argument for BRK?

I mean their cash pile is also invested in money markets (so you get that), and the rest of the portfolio consists of quality companies where their (combined) valuation didn't explode in the last 1,5 years. So it's an opportunity to invest into something that might not be overheated.

Comment by le-mark 36 minutes ago

[flagged]

Comment by DougN7 48 minutes ago

It’s such an obvious Ponzi scheme the companies should get delisted.

Comment by NegatioN 38 minutes ago

https://archive.is/epMTs

Comment by meangenehackman 53 minutes ago

It is far better for society when companies like Nvidia spend their money rather horde it like Apple.

Nobody (including the dragon) benefits from sitting on piles of gold.

Comment by pinkyboy 30 minutes ago

Apple is a $5t company that has $45b cash-on-hand.

Your post is "cute", but 3 or 4 months of operating cash isn't a great example of "sitting on piles of gold".

Comment by renegade-otter 1 hour ago

They are just adding zeros to already obnoxious numbers that make no sense. The endgame is on.

Comment by joaquieneCnix 50 minutes ago

DRAM will get to the moon before we get ...

Comment by theideaofcoffee 1 hour ago

It's come to a point (or has it passed it) that these numbers are completely meaningless. One hundred billion here, $750B there, $1.2T over a year or so, toss in $300B for a few hyperscalers there. There's no imaginable scenario where these are actually backed up with real profit to where the investments make sense. Just passing the same hundred dollar bill among everyone and all booking it as revenue. I can't wait until it pops.

Comment by gdulli 28 minutes ago

Displacing a vast amount of labor is what makes the numbers make sense. We don't know if they'll succeed or not, but it's obviously what they're chasing.

In addition to actual lost jobs, replacing a skilled white collar worker with a fungible operator of AI lowers the salary for that role significantly.

Comment by lopsotronic 1 minute ago

Have they thought about the expenses in running continental Death Pits?

OK, dumb attempt at funny over, but certainly someone is thinking about instability costs? Even if everyone is super cool with literal Death Pits, they don't run for free. And not everyone will be cool with watching their entire family die, which will mean substantial costs in security - and money spent on security, that's just setting money on fire, that money doesn't work any more.

I know they've batted around the ideas of slave collars and suchlike for the guys running the Death Pits, but I haven't seen anything that wouldn't be ultimately defeated by a typical zoo chimpanzee, let alone a psychopathic Delta Force guy with more advanced degrees than your entire family.

And the brain control chips they've been trying to get working . . well, they're not ready yet. You'll just make the Delta Force guy even crazier .

Comment by bwfan123 1 hour ago

I guess it gets bigger with each passing day. Tens of billions goes to Hundreds of billions.

Comment by vannevar 1 hour ago

It has to get bigger. As soon as it starts shrinking, the next round of debt will no longer be able to cover the prior round of commitments. What is happening in AI is essentially a gigantic version of what is happening in consumer auto loans, they just keep refinancing for more and more money. Eventually there will be no one willing to lend them more, and then they'll go to the government to bail them out.

Comment by ryandvm 47 minutes ago

Yeah, I'm pretty sure we've already passed some sort of fiscal singularity where economic and political interests are so intertwined that there can only be growth. If there ever isn't growth, then the legislators (who are elected via corporate sponsorship) will pull whatever levers necessary to make sure that there will always be asset growth.

It's some sort of tragic positive feedback loop that isn't going to stop until the whole thing comes crashing down for everyone and we're paying $37,000 for a loaf of bread.

Comment by 26 minutes ago

Comment by apercu 58 minutes ago

I'm not sure a government can bail out these irrational companies and have it not be political suicide.

Comment by fullshark 45 minutes ago

I'd kill my political career for the private sector rewards sure to follow.

Comment by SoftTalker 35 minutes ago

Those companies are already roundly hated by the general voting public, so I agree.