Nvidia, CoreWeave, and Nebius: Inside the Circular Financing of the GPU Boom (io-fund.com)

Article summary

The article discusses the rapid growth of neoclouds, such as CoreWeave and Nebius, which provide access to the latest Nvidia GPUs and optimized compute utilization for hyperscalers. However, their growth is not profitable, and they rely on circular financing structures, including investments from Nvidia, to fund their expansion. Nvidia's investments in these companies are seen as a hedge against hyperscalers designing their own chips and a way to secure large-scale customers. The article highlights the risks associated with this financing model, including the potential for debt and cash flow issues.

Main themes

• Neocloud growth
• Circular financing
• Nvidia investments
• Hyperscaler demand
• AI infrastructure
• Financial risks

What commenters say

• The circular financing model used by neoclouds is not a significant issue, as Nvidia's investment is only a small percentage of CoreWeave's capital expenditures.
• The scale of investment in neoclouds and AI infrastructure is unprecedented and poses a significant risk to the economy if the market were to collapse.
• The AI bull case relies on the idea that AI will replace human labor and create new industries, but it is unclear who will profit from this shift.
• The comparison between the current AI bubble and the dot-com bubble is apt, with some commenters arguing that the scale of investment and potential for collapse is much larger this time around.
• The financial system is designed to contain the risks associated with circular financing and AI investment, but this may not protect ordinary people's jobs and finances if the market were to collapse.
• The lack of transparency and understanding of the business structures and financing models used by neoclouds and AI companies makes it difficult to accurately assess the risks and potential outcomes.
• Some commenters argue that the AI industry will be bailed out by the government if it were to collapse, while others believe that this would be a disaster waiting to happen.
• The AI industry's growth and investment are not necessarily tied to its profitability, and some companies may be able to pivot or sell capacity to stay afloat even if the economics do not work out.