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My understanding is that it's not about the money itself but the model:

- you fund a new company and sign long terms contracts with it - this new company uses the money you gave it and a lot of debt (backed by long term contracts) to build datacenters and buy a lot of GPU - your figures look great

What happens when they run out of debt or funds? If they reach some kind of profitability it's not a big deal, but if not ...

EDIT

Forget to mention the buyback of unused capacity problem: what happens to your figures when you have to buy back tons of unused GPUs?

Bear in mind the last big thing from the tech industry was cryptocurrency.

And that was rife with scams, chicanery, and nonexistent investments. As well as needing lots of GPU-filled power hungry data centres.

So I think a lot of people are viewing the AI boom through the same lens.

You're probably just responding to the headline but this person is an AI bull and isn't claiming it's a big deal, she's going into it and explaining it.

It sounds like Nvidia is not only supplying GPUs first to neoclouds, it is also supplying them for free if they cannot be resold:

"Furthermore, in the case of CoreWeave, Nvidia has also provided a significant financial backstop against unsold GPU capacity. Under the agreement with an initial value of $6.3 billion, “in instances where [CoreWeave’s] datacenter capacity is not fully utilized by its own customers, NVIDIA is obligated to purchase the residual unsold capacity through April 13, 2032.” In other words, Nvidia is committed to purchasing unsold GPU capacity if CoreWeave is unable to find another buyer. With an initial value of $6.3 billion, there is the potential that the arrangement could become larger over time."

I don't know how Nvidia is handling Coreweave GPU sales revenue in their accounting, but it sounds to me like it should have a pretty big asterisk attached to it. It's more like a consignment arrangement than an actual sale. And it obviously creates a huge incentive for Coreweave to over-order GPUs, since there's no risk (I doubt they're paying cash up front).

Billions of dollars sounds like a literal "big deal", but not necessarily "a problem". Worst case for nVidia is they lose 2 billion dollars, NBD.

Simple answers: because it makes for a good headline.

anyone can isolate one number to fit their bias. if you look at the wider financing in the industry and the context of multiple AI deals in the billions without any cold hard cash flow or reasoning it kinda makes sense

> Why is it a big deal? Nvidia invested $2b into CoreWeave for 9% equity stake.

Depends if they actually got the $2b in real money. There's a difference.

It's a big deal if no money was involved. Nothing even entered the company directly. Some deals have structured with Special Purpose Vehicles where money goes to the SPV. The SPV buys GPUs with it (from Nvidia). GPUs is loaned back to the company involved. So this company is stuck with this GPU rental, which may or may not be what they want and not $2b.

This sounds like a bad deal? So Nvidia had to sweeten the deal and promise min utilization on those GPUs by renting it themselves even if they don't need it.

So what's income and what's expense here?

That's the problem. It's inflated and messed up.

> So the question is can they keep the pricing up on the older ones a few years down the line

They don't expect to keep the prices flat over time, and everyone involved will have planned for this. Prices are highest when they're the newest and greatest (part of why it's valuable for neoclouds to be first in line for new models), and drop year by year as newer GPU models can do equivalent work at lower cost.

You can see a pretty cool dataset of this at [1]; H100 prices where $3/hr in 2023, and dropped linear-ish to $1.75/hr by 2025. And also the notable exception that prices are up this year due to shortage.

[1] https://semianalysis.com/gpu-pricing-index/

These questions can't really be answered now because things are moving too fast. That may explain why people are latching on to things they can prove like circular financing even if those arguments are pretty weak.

But how do you even measure the ROI of tokens? I don’t think it’s possible, tokens aren’t fungible. You can spend millions on tokens that don’t contribute one bit to the company revenue, then spend $10 that will actually result in useful things

IMO, it can be profitable - but only at the business level. A business with many software devs can pay the steep price for access.

For almost everything else, the answer is no. No one else would pay the real costs to run them.

It'll require the whole industry to shrink down massively compared to what we're seeing now - down to a profitable (and much smaller) core.

Could it be that someone there just didn’t like or vibe with you?

FWIW, I’ve referred someone 3 times to the same position because I’m very sure he would be a good fit, and I’ve seen his work.

But for trivial reasons (“He doesn’t seem enthusiastic enough” and “the other candidates are better at promoting/selling themselves”) , a couple of managers that are above me in seniority (and directly in the hiring loop) just refuse to pass said person.

In the end he’s stopped applying, and I feel shitty for referring him.

the interview process was rewritten at coreweave by a bunch of hired google engineers to reflect the rest of the industry about a month before they went public. at the time they were prepping for IPO they started to hire from other fortune 500s aggressively, and the whole company went from startup to same shit as the valley over about 6 months. when i interviewed the process was shockingly simple, like literally tell me how to fetch json in go, and by the time i left it was 6 rounds targeted to take two months.

How is what you describe "YC-ish"?

Blessing in disguise for who?

Any surplus after a pop will be sold for market value and lead to more new cloud provider startups and co-location options.

There is no AI bubble. The underlying fundamentals do in fact line up with the market. The faster you realize this will never pop, the faster you realize that you too can make money in the biggest gold rush in human history.

If I had to guess, probably Web-style.

LLMs are actually useful, people are willing to pay for access to them, and they do genuinely enable things that were unrealistic or impossible before. The advances in image, video, and sound models since 2020 are also striking but likely won't be as transformative as LLMs.

That being said, I don't think it's unlikely that we'll see a plateauing of progress followed by a strong crash/correction in the market a-la dot com. The Allbirds situation absolutely has echoes of pets.com.

I also feel that commodification is coming for models, training/inference hardware, and software (e.g. CUDA), as it has for nearly everything else useful in tech. So I expect valuations driven by unique advantages here to be eroded over time (Think Sun and SCO after Linux on cheap x86 servers became the norm).

I think it will be like the 90's collapse but bigger. It must be noted that the financial markets have been awash in cash for some time since companies have been making huge profits since the 90's. So the money that will be lost will mostly be that of rich investors and large companies who were sitting on a bunch of capital they didn't know what to do with.

> I don't think it actually counts as circular.

It is. The GPUs go on to be used to get loans to then get more GPUs.

I have the same feeling, but after reading this report I believe big hyperscalers will survive the bubble when it pops.

Now I've got the feeling they don't have huge amounts of GPUs sitting in their DCs, but rented for Opex. In case the bubble pops they might get it at discount as CapEx (like Amazon did with dark fiber after the dotcom bubble).

>> the volume is orders of magnitude worse than what caused the 2007ff global financial crisis.

Nobody lives in GPUs and what was the ratio of equity/debt for the toxic assets in 2007?

That’s not the point. The issue is that loaning/investing to a client so they can buy from you conflates your investments with your revenue.

It may be fine, or not. It it has been a frequent type of manipulation to obfuscate the real accounting situation.

What? You can go out & buy whatever RAM you want. It just requires willingness to pay more than Nvidia & friends. That's how markets are supposed to work.

Manyfacturers aren't artificially restricting supply, they're running fabs full-tilt. You could want them to build more fabs to meet demand. Which they are, but at a more modest rate than what you would want, because those manufacturers have been burned in previous boom-bust cycles. Never mind that fab-construction lead times are measured in years.

And what's stopping you from fabricating & selling RAM? I've read it's very profitable! Oh yeah, it takes many $B to pull a SOTA fab out of the ground.

Vendors price-gouging? Probably. Wouldn't you?

TLDR; it's not a monopoly issue. This is a high-tech specialized market where a ridiculous spike in demand is near-impossible to cater for. You want some new RAM-heavy gadgets? Shell out $, adjust your RAM 'wants', or be patient.

Didn't they move to escape that world?