Nvidia deals create a debt-fueled AI loop
13 posts across 4 communities in the last 60 days; 62% from Hacker News.
“The problem with private credit is that most of the valuations are not publicly tested.what do I mean by that? oracle is publicly traded, which means they (should) report profit loss and other key metrics in a standardised way. This means that one company's metrics should be…”
“If they were buying GPUs with equity then it wouldn't show up on Nvidia's quarterly report as revenue, even if the net trade is GPUs for equity. This is the point of the structure, to make cash flows show up as top line revenue. Furthermore, the structure pushes the liabilities…”
“> how much demand is still gated behind cost constraints. The market for this is HUGE.I think this misses the actual limits here.The problem isn't demand it's, "how much people are willing to spend on it".Cheap AI has to be served on cheap compute, and if inference gets cheap…”
Several posts express concern about Nvidia's financial dealings, suggesting a cycle of investment and debt that could unravel if AI revenue doesn't meet expectations.
SOURCES (23)
“Beyond CoreWeave, several major NVIDIA-backed "neoclouds" and GPU cloud providers including Lambda Labs, Nebius, Crusoe Energy, and IREN are facing severe market scrutiny, growing massive debt pressure, or slow AI revenue growth. What happens to NVIDIA and all the other ai hardware companies like the…”
“The problem with private credit is that most of the valuations are not publicly tested.what do I mean by that? oracle is publicly traded, which means they (should) report profit loss and other key metrics in a standardised way. This means that one company's metrics should be comparable to others. Their value is assessed by the second on a public market. This means that anything that affects thier value (real or imagined) is reflected almost instantly. (same goes for debt)Private credit, and the”
“The $50B matters less than who actually carries it. If it sits on Broadcom’s own balance sheet, it’s a very different bet from lenders funding OpenAI’s purchases. For comparison, Nvidia’s Q2 10-Q shows up to $108.5B of guaranties on long-term data center leases for its customers, and that only shows up in the notes, not the headline. [re: Nvidia in talks to acquire US ‘open’ model start-up Reflection AI]”
“The buyer side of that is pretty visible too. Per Nvidia's Q2 10-Q, it spent $42.4B buying equity in other companies in the first half of the fiscal year, close to the $45.3B it returned to shareholders. When the biggest chip seller is also one of the most active buyers, the get acquired path gets a lot more likely. [re: Nvidia in talks to acquire US ‘open’ model start-up Reflection AI]”
“A lot of very solvent tech firms are issuing corporate bonds for the first time to finance their AI datacenter buildouts. More generally, there are solidly rated corporate bonds yielding over 5% if you have reasonable risk tolerance. Municipal bonds too. The point is we should really make sure our new rentals give a solid 10%+ yield when the cost of money including our cost of money is 7% or more.”
“> I've spent several 1000 dollars on AI products this month, roughly 3000 dollars.> Trust me, there are many other people like me in the world and the enterprises are spending even more.Awesome, let's do some math here.I'll do both $1k/month and $3k/month, please follow along. To make the math even simpler to follow, I'll actually reduce your amounts. ~$800/month will get us about $10k/year and ~1600/month will mean about $20k/year, makes for easier divisions.Current total investment into AI is”
A classic big ai talking point. Color me skeptical.
“Yeah, that was the cynical part of my comment:At this point of circular financing, nVidia basically owns the majority of production capacity of almost all major AI companies, making those companies indirectly compete in the market with resources of nVidia.Just like Snickers is competing in the market merely with production capacity of Mars Inc., and Mars doesn't care if Snickers or Milky Way wins (even more, they want competition).My fault, was a bit too much I reckon. I thought that Mars owning”
“honestly thats your opinion. other people who might not be rich billionaire might disagree with you others might agree. saying 'its reasonable to expect a little bit of restrain" is not an objectibe statement so idk what you trying to achieve here..”
“> Silicon Valley is clearly responding to massive demand for AI services > to provide services that people and companies want so badlyNot at all. In economics, demand has little to do with "wants", it means paying the price to buy the service. In that light, there isn't much demand for AI because the companies providing it are losing huge sums of money to subsidize underpriced and mostly free services.The AI "demand" is now paid for by circular deals and huge debts incurred for the sake of centr”
“If they were buying GPUs with equity then it wouldn't show up on Nvidia's quarterly report as revenue, even if the net trade is GPUs for equity. This is the point of the structure, to make cash flows show up as top line revenue. Furthermore, the structure pushes the liabilities off-balance sheet. This means if the flows slow down, in-flows rapidly become out-flows as Nvidia has to cover its liabilities. This is the problem with the trade, it puts everything on a knife's edge.”
“> how much demand is still gated behind cost constraints. The market for this is HUGE.I think this misses the actual limits here.The problem isn't demand it's, "how much people are willing to spend on it".Cheap AI has to be served on cheap compute, and if inference gets cheap enough to unlock massive usage numbers, by definition it also doesn't require anywhere near as much infrastructure per unit of demand.Take DeepSeek serving ~100T tokens/day, depending on workload and utilization, you're pot”
“Nvidia has a market cap of $5T, and so far today the stock is up almost 10%, so that's another $500B. Paying $13B for HF is chump change to them.NVidia have been making lots of moves recently towards supporting open weight models and local AI, and it makes sense for them to buy HF who support the same, if for no other reason than to prevent someone else like Musk buying them just to shut them down, although I assume they have plans to do a lot more than just keep HF alive.”
“Whether it's a bubble or not, the part worth watching is where the risk ends up. The banks are making an AI data center loan, then doing significant risk transfers, paying outside investors to absorb the first losses. So the risk leaves their books for regulatory purposes. Who do you think buys risk for the yield? submitted by /u/oilman2013 [link] [comments]”
“For context, nvidia has teamed up with six BIGGG investment firms to raise over $500 billion from outside investors to build AI data centers, which will be kept separate from Nvidia's own books. Basically treating a warehouse of GPUs like a toll road and inviting investors to lend against on the promise that it will make them shit loads of money over time. If this works, it opens the floodgates for more AI infrastructure to get built, funded by people who aren't Nvidia or tech giants. Th”
“Yes. All these companies making "investments" in each other, where company A puts 10 billion into company B and company B buys 10 billion of company A's products can't work out well in the end. This is separate from the concept that AI has real value. Pointing out the likely doomed to fail huge mutual investments is a separate issue. We can have two ideas in mind about something.I am worried about the damage when this ends. Sure, there's way over exuberance in my opinion about the value of all”
“>I'm sure there will be some losers,This is the way it is on Wall Street more each century, and for AI to go public on that exchange it's going to have to go big or go home. Considering the amount of money that has already been spent privately.There is no alternative pipeline to replenish those reserves, and different people have different ideas about capacity and bottlenecks relative to ambitions and what they are supposed to get for their money.As has been mentioned in another comment, there”
“Yeah, but that was a classic stock bubble. There's a lot of debt in this one. Think of all the debt for the data centers and margin for stocks is at record high. You just lost one the of the biggest buyers of data center stocks at a time they desperately need to keep their stock prices up in order to borrow more.”
“Killed from both sides: long the AI buildout (SK Hynix, Nebius, SanDisk, Micron, CoreWeave - all down 35%+), short software names like Adobe that ripped higher. The part that should scare you: forced sellers don’t care about your cost basis. They were forced to sell off their entire public portfolio in one shot. Wednesday’s 1,100-point Dow drop was probably partly this book getting liquidated into no bid. Notice how chips bounced today the moment it cleared? His letter says the fund was “not imm”
“Its bad if the expected demand is an illusion. For example, when a company builds out a data center they don't build it for demand today, they build it for the demand they expect when the data center is running and for how much they expect demand to grow over the lifetime of the data center (this is a simplification, they build a financial model of how they can grow capacity as demand increases over the lifetime of the data center). If the demand is lower than expected then the counterparty cann”
“Ctrl+F: "national security".Didn't see national security mentioned a single time in all the current comments or in the article. Speculations about profit are great and there are many companies that will largely be irrelevant across all the major metrics which will not be in a good position, but there are always these people lost on the profit picture of anything.Does anyone realistically believe that all of these smart people are rushing into AI to maximize profit? No, they're rushing into it,”
“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 b”