Nvidia is the central bank of AI

I see two factors converging to cause a collapse of this house of cards:

1. People are realizing that what they need isn't more general intelligence, it's more specialization. A small but well tuned coding model, a small but well tuned customer service model, a small but well tuned document explorer.

2. Specialized hardware - TPUs and NPUs - especially coming out of china. The latest GLM model was trained and runs on Huawei hardware. Nvidia is only worth so much because they are the biggest and best provider of the kind of compute needed to run llms, but the export bans mean china has a lot of incentive to topple that monopoly.

The amount of compute we need to do the things llms do is falling rapidly, the number of people who can provide that compute is rising.

The problem with that is that OpenAI can only afford to pay for the compute because they are burning investor money (and so are most of OpenAI's biggest clients). They are losing billions. If they stop burning money, nobody else will be there to pay for that compute at OpenAI's cost.

Sure, somebody will probably be able to use these GPUs, they just won't be able to pay nearly as much for them as OpenAI does.

In reality, it's just nowhere near worth as much as OpenAI pays for it. Inflating the cost of compute is part of the problem caused by the circular financing, and if (or maybe when) OpenAI goes, the price of compute will go with them.

Failure to take into consideration those kind of correlations ("If my biggest client isn't able to buy it, I would be able to find someone else who will") is one of the principle causes why many risk models turned out to be garbage during the Great Financial Crisis.

They would have to go insolvent in a way that hits Nvidia revenue. Those are related by distinct factors, a difference that may matter in a crisis.

This is the big point IMO since I have never given $1 to OpenAI but I subscribe to Vidu and Typecast, and have given money to Kling, Hailou, and even Gemini in the form of Google Workspace.

So these other guys have products and use cases, which OpenAI has never been able to crack beyond ChatGPT. And ChatGPT was never worth paying for, IMO.

If OpenAI dies, it's not because there is no market for the technology (which is all NVIDIA cares about), it's more that OpenAI doesn't know how to run a relevant technology company.

They were given everything, not just NVIDIA's billions of dollars and credit backing but all the first-mover advantage, all the respect and credibility early on, so it's really sad to see them unable to develop interesting products and turn a profit in a space they helped pioneer, while so many others are making money with the tech all around them.

NVIDIA is fine. The technology will continue to improve and NVIDIA will stay at the center. OpenAI is fucked - knew it when they retired Sora to focus on text-to-text and coding (a largely solved problem).

How? The hardware is in OpenAI's datacenters. Does Nvidia have a couple hundred semi trucks, contractors, and IT technicians, to repo the hardware and resell it to someone else before it's lost most of its value? These chips will be replaced approx every 3-4 years. So if OpenAI tanks, after Nvidia pays for and waits for the process to collect the hardware, they then have to sell it for pennies on the dollar. They lose almost all the investment.

Also consider that SpaceXAI already had datacenters full of gear that they basically weren't using because nobody wanted their product, so they now rent it to Anthropic. The demand for hardware isn't really there at the scale of OpenAI.

All the "frontier" AI companies *are* currently insolvent. They have never been anything other than cash burning machines.

The only way they keep the lights on and the doors open is by borrowing money --- and epic amounts of it. If those operating the cash spigot decide to turn it off, all AI companies will likely be similarly affected --- and so will Nvidia.

OpenAI expects to burn through more cash between 2024 and 2029 than Uber, Tesla, Amazon and Spotify did - combined - before those companies started making money

https://www.morningstar.com/news/marketwatch/20251205243/thi...

Nvidia is vendor financing its output.

An ai company order $100m of GPUs. Nvidia delivers and holds onto that debt as an asset - like a bank loan.

The production company uses AI to create better plant and purchases $100m of AI tokens to do so. The ai company hold that debt like a bank loan

Nvidia requests $100m of production based on its $100m of orders. The production company holds that debt like a bank loan.

You now have a monetary loop. Take a single $10 bank deposit and Nvidia pays the production company, who pays the ai company who pays Nvidia. Run that round the circle a few million times and everybody has been paid.

Rinse and repeat.

If you go to a bank and get a loan, that is literally money that did not exist before you got a loan. People think that you are borrowing money that somebody else put in the bank, but that's not true. Banks can lend out a lot more money than people put into them.

No. Most money in modern economies is created by private parties [1].

[1] https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...

Bank takes $90 of that deposit (assuming 10% fractional reserve rule, no idea what the actual number is), and loans it out to party B, who pays it into either the same or another bank. Same rules apply -- except now it's down to $81 being loaned out, and so on and so forth, until that 100$ generated $1000 in total bank deposits.

edit: of course, it's never actually directly like this, a lot of other factors are involved, maybe the money is spent, maybe no one wants to borrow it, etc etc -- so it's more complicated but that's I think what they mean

If I give you GPUs worth $1bn, but take 100m payments for 11 years, then during that time you can use your other mony to buy other things that arent GPUs

If we stop after the 11 years and dont make new loans, the supply has shrunk back

But everyone is now chasing the same opportunity (AI and its dependencies like hardware and power) that will drive prices higher in those sectors until supply responds (or demand disappears).

The prices of gpus are nuts right now due to demand, but theoretically speaking demand causes more supply to appear and thus decrease prices* and then gamers can reap the benefits of massive amounts of investment.

* or at least thats what people on this site keep telling me.

Oh shit, I had file deleted that. I remember now. I think I used that with the first N64 emulator, I think Project something to play Turok the first person dinosaur hunter game. Life before the internet was better I think.

It's still profitable, it's their original raison d'etre, and there's no real reason for them to stop even if it its rounding error on their regular business.

Probably will never, ever see an Nvidia card with >32GB of VRAM though unless they start making dies that lack LLM performance like the gimped ethereum mining cards.

The GPU crunch came because cards like the 3060 were extremely cheap and could outrun most sub-$1000 ASICs at the time. The dedicated crypto GPUs were too-little too-late; hundreds of thousands of ordinary CUDA-capable GPUs had already been repurposed for mining by the time they launched.

at any given time there is a finite amount of it most easily observed in currencies’ relative price to another currency, and its movement between owners causes distortions in asset prices

most people I’m around and most trading indicator developers I’ve seen don’t seem to conceptualize the flow of value around the economy. so it feels niche and maybe visualizing this mental model can help many people

[1] central banks can functionally delete money in their bond purchase and roll off programs