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The mechanics are legal but the objective is the same which is buy your own output by manufacturing a demand. I am sure they can buy good lawyers to keep it co

The mechanics are legal but the objective is the same which is buy your own output by manufacturing a demand. I am sure they can buy good lawyers to keep it completely legal.

CuriouslyC 4d ago
I'd argue that in this case, Nvidia is accelerating a flywheel to try and reach critical velocity rather than manufacturing demand.
- oblio 4d ago
  > I'd argue that in this case, Nvidia is accelerating a flywheel to try and reach critical velocity rather than manufacturing demand. I'd argue that in this case, if the flywheel never reaches critical velocity, they are manufacturing demand.
  - fuzzfactor 4d ago
    Well, Nvidia started out as a manufacturer first & foremost. Maybe I'm in the middle of the road :) Seems like economy, scale, velocity, and even "critical mass" are related in some way, but not the same at all. I would say it's quite possible that economies of scale can go from positive to negative without much warning. I think it's most sustainable financially when the underlying "economy" is what drives the resulting scale-up, which usually does occur in phases or stages where each successful milestone informs the next campaign more realistically than you can get any other way. As market demand grows beyond baseline sustainability it becomes less costly to serve each additional customer this way. The opposite effect could occur if meeting lofty scaling goals requires an ever increasing cost of customer acquisition beyond the point of unmet initial pending demand. When the scaling process itself is what drives the activity without being limited by the actual buying power of the ultimate consumers at any one point, things can really get ahead of themselves. Accounting practices can be so diverse that the only way to be sure whether scaling ahead of the curve was actually "economical" is after liquidation ends up occurring. Unfortunately, liquidation of one kind or another is more likely when the scale is based on hyperbolic dreams rather than more reasonably optimistic estimates. But who's to say which is which, and the continuum between them is blurry enough without any highly interested parties trying to muddy the waters even further. Who even knows if they've given it as much thought as it deserves, or if more clear-headed thinking could be the primary factor given what there is to work with :\ Hence the designation "Hyper-Scalers".
- JumpCrisscross 4d ago
  > to try and reach critical velocity Do you mean economies of scale?
nonethewiser 4d ago
Are you claiming NVIDIA manufactured the demand for AI?
- silverFork 4d ago
  Yup. Investing in your customer, what is that if it is not buying demand. They get the cash to buy your output.
  - JumpCrisscross 4d ago
    > Investing in your customer, what is that if it is not buying demand It can be manufacturing demand that wouldn't otherwise exist. It can be facilitating demand to come online sooner and smoother. You can't tell which it is by only looking at the transaction; you need to know how many dollars are going into the ecosystem as a whole for purchases of goods and services. Until Anthropic's S-1 lands tomorrow-ish, we won't have that publicly.
- Avicebron 4d ago
  Not a lot of people were clamoring for copilot in their outlook. But NVIDIA are giving money to labs so that they will buy their hardware. Manufacturing demand for their hardware, which is used for more AI, which eager PMs stuff into every crevice they can find and call demand.
  - CuriouslyC 4d ago
    ChatGPT was the fastest growing software of all time not that long ago. Citing a bad AI product as evidence for lack of demand is saying the failure of the Homer car was due to the fact that people don't like automobiles.
    - brazukadev 4d ago
      Don't need to go far. Sora by the same company was the fastest incineration of dollars in software of all time.
    - 4d ago
JumpCrisscross 4d ago
> mechanics are legal but the objective is the same which is buy your own output by manufacturing a demand Eh, I think it's an open question whether OpenAI and Anthropic would be buying GPUs like they are with or without Nvidia's financing. Financing customers' purchases isn't proof per se of demand creation versus demand inducement. Anyone who claims they've seen a certain fact in these financings is deluded or lying.
- silverFork 4d ago
  The Ai companies are not really profitable now so they need cash incoming from the skies to grow even more and they are still losing money. Ai farms and much of Ai software world are money sucking machines with assumed profit in future. Their P/E is assumed to be positive in future but it isn't now. The hardware suppliers are making the real money now from the AI hardware pipeline and NVDA is pretty much the center of hardware pipeline sucking most of the cash. In my opinion NVDA knows that the profits from AI have to flow from Ai software to keep the music playing and that it has a lot of competition incoming and so it is funding its customers and buying its own output to circulate the cash towards itself to make as much money as possible now. It has no other choice in reality.
  - JumpCrisscross 4d ago
    > Ai companies are not really profitable now You need to be more specific, because there are absolutely sections of the AI economy that are clearly and presently profitable. > Ai farms and much of Ai software world are money sucking machines If AI farms refers to datacenters, plenty of existing ones are currently profitable.
    - silverFork 4d ago
      Their assets are depreciating faster than they can pay it off and that means that the profits are pretty much a temporary illusion in my opinion that is because the so called ai chips have short lifespans and don't age gracefully. What happens when you buy a car and say use it for delivery for income for example and then the engine dies. You have to buy a new car and pay for the old one as well.
nl 4d ago
Vendor financing[1] has a long and successful history. Here's a good WSJ article from 2001 about the practice and risks[2], written after the DotCom crash in March 2000. There is nothing illicit or illegal in anyway about what NVidia is doing. It's reasonable business practice, and people on HN are simply ignorant to think otherwise. NVidia is very aware of the risks it entails, but has the money to cover those risks. [1] https://en.wikipedia.org/wiki/Vendor_finance https://en.wikipedia.org/wiki/Vendor_finance [2] https://archive.is/mOIfg https://archive.is/mOIfg
- stymaar 4d ago
  > There is nothing illicit or illegal Which is exactly the point of the person you're responding to. What part of “but completely legal” isn't clear enough?
  - JumpCrisscross 4d ago
    Enron was illegal but also a sham. The point is we have no evidence Nvidia's financing is a sham. It could be. And if it is, it's a huge problem. But the shammiest parts of what Enron did do not apply to Nvidia, which makes the comparison a bit like saying OP is Hannibal Lecter but legal while glossing over the fact that OP never murdered anyone but once drank red wine. (Also note that illegal != illicit.)
  - nl 4d ago
    Their implication ("A la Enron", "they can buy good lawyers to keep it completely legal") that there is something illicit or wrong in what NVidia is doing. The OP clearly is implying that it should be illegal for some reason. This is wrong - not only is it nothing like Enron (!?) but it's a great way for both NVidia and the companies building on them to build what they want.
- ElProlactin 4d ago
  A big problem in discussions about Nvidia is that people can't distinguish between: 1. The equity investments Nvidia has made in its customers. 2. The guarantees/backstops it has extended to some of its customers. 3. Vendor financing. The vendor financing is the least interesting of the bunch. Nvidia has already disclosed that when it provides vendor financing, the average customer pays in less than 60 days. These are not long-term financing arrangements and virtually every big company sells on these type of terms (net-30, net-60, etc.). The equity investments and guarantees are where there is room for legitimate debate.

The mechanics are legal but the objective is the same which is buy your own output by manufacturing a demand. I am sure they can buy good lawyers to keep it completely legal.

CuriouslyC 4d ago

I'd argue that in this case, Nvidia is accelerating a flywheel to try and reach critical velocity rather than manufacturing demand.

oblio 4d ago
> I'd argue that in this case, Nvidia is accelerating a flywheel to try and reach critical velocity rather than manufacturing demand. I'd argue that in this case, if the flywheel never reaches critical velocity, they are manufacturing demand.
- fuzzfactor 4d ago
  Well, Nvidia started out as a manufacturer first & foremost. Maybe I'm in the middle of the road :) Seems like economy, scale, velocity, and even "critical mass" are related in some way, but not the same at all. I would say it's quite possible that economies of scale can go from positive to negative without much warning. I think it's most sustainable financially when the underlying "economy" is what drives the resulting scale-up, which usually does occur in phases or stages where each successful milestone informs the next campaign more realistically than you can get any other way. As market demand grows beyond baseline sustainability it becomes less costly to serve each additional customer this way. The opposite effect could occur if meeting lofty scaling goals requires an ever increasing cost of customer acquisition beyond the point of unmet initial pending demand. When the scaling process itself is what drives the activity without being limited by the actual buying power of the ultimate consumers at any one point, things can really get ahead of themselves. Accounting practices can be so diverse that the only way to be sure whether scaling ahead of the curve was actually "economical" is after liquidation ends up occurring. Unfortunately, liquidation of one kind or another is more likely when the scale is based on hyperbolic dreams rather than more reasonably optimistic estimates. But who's to say which is which, and the continuum between them is blurry enough without any highly interested parties trying to muddy the waters even further. Who even knows if they've given it as much thought as it deserves, or if more clear-headed thinking could be the primary factor given what there is to work with :\ Hence the designation "Hyper-Scalers".
JumpCrisscross 4d ago
> to try and reach critical velocity Do you mean economies of scale?

nonethewiser 4d ago

Are you claiming NVIDIA manufactured the demand for AI?

silverFork 4d ago
Yup. Investing in your customer, what is that if it is not buying demand. They get the cash to buy your output.
- JumpCrisscross 4d ago
  > Investing in your customer, what is that if it is not buying demand It can be manufacturing demand that wouldn't otherwise exist. It can be facilitating demand to come online sooner and smoother. You can't tell which it is by only looking at the transaction; you need to know how many dollars are going into the ecosystem as a whole for purchases of goods and services. Until Anthropic's S-1 lands tomorrow-ish, we won't have that publicly.
Avicebron 4d ago
Not a lot of people were clamoring for copilot in their outlook. But NVIDIA are giving money to labs so that they will buy their hardware. Manufacturing demand for their hardware, which is used for more AI, which eager PMs stuff into every crevice they can find and call demand.
- CuriouslyC 4d ago
  ChatGPT was the fastest growing software of all time not that long ago. Citing a bad AI product as evidence for lack of demand is saying the failure of the Homer car was due to the fact that people don't like automobiles.
  - brazukadev 4d ago
    Don't need to go far. Sora by the same company was the fastest incineration of dollars in software of all time.
  - 4d ago

JumpCrisscross 4d ago

> mechanics are legal but the objective is the same which is buy your own output by manufacturing a demand Eh, I think it's an open question whether OpenAI and Anthropic would be buying GPUs like they are with or without Nvidia's financing. Financing customers' purchases isn't proof per se of demand creation versus demand inducement. Anyone who claims they've seen a certain fact in these financings is deluded or lying.

silverFork 4d ago
The Ai companies are not really profitable now so they need cash incoming from the skies to grow even more and they are still losing money. Ai farms and much of Ai software world are money sucking machines with assumed profit in future. Their P/E is assumed to be positive in future but it isn't now. The hardware suppliers are making the real money now from the AI hardware pipeline and NVDA is pretty much the center of hardware pipeline sucking most of the cash. In my opinion NVDA knows that the profits from AI have to flow from Ai software to keep the music playing and that it has a lot of competition incoming and so it is funding its customers and buying its own output to circulate the cash towards itself to make as much money as possible now. It has no other choice in reality.
- JumpCrisscross 4d ago
  > Ai companies are not really profitable now You need to be more specific, because there are absolutely sections of the AI economy that are clearly and presently profitable. > Ai farms and much of Ai software world are money sucking machines If AI farms refers to datacenters, plenty of existing ones are currently profitable.
  - silverFork 4d ago
    Their assets are depreciating faster than they can pay it off and that means that the profits are pretty much a temporary illusion in my opinion that is because the so called ai chips have short lifespans and don't age gracefully. What happens when you buy a car and say use it for delivery for income for example and then the engine dies. You have to buy a new car and pay for the old one as well.

nl 4d ago

Vendor financing[1] has a long and successful history. Here's a good WSJ article from 2001 about the practice and risks[2], written after the DotCom crash in March 2000. There is nothing illicit or illegal in anyway about what NVidia is doing. It's reasonable business practice, and people on HN are simply ignorant to think otherwise. NVidia is very aware of the risks it entails, but has the money to cover those risks. [1] https://en.wikipedia.org/wiki/Vendor_finance https://en.wikipedia.org/wiki/Vendor_finance [2] https://archive.is/mOIfg https://archive.is/mOIfg

stymaar 4d ago
> There is nothing illicit or illegal Which is exactly the point of the person you're responding to. What part of “but completely legal” isn't clear enough?
- JumpCrisscross 4d ago
  Enron was illegal but also a sham. The point is we have no evidence Nvidia's financing is a sham. It could be. And if it is, it's a huge problem. But the shammiest parts of what Enron did do not apply to Nvidia, which makes the comparison a bit like saying OP is Hannibal Lecter but legal while glossing over the fact that OP never murdered anyone but once drank red wine. (Also note that illegal != illicit.)
- nl 4d ago
  Their implication ("A la Enron", "they can buy good lawyers to keep it completely legal") that there is something illicit or wrong in what NVidia is doing. The OP clearly is implying that it should be illegal for some reason. This is wrong - not only is it nothing like Enron (!?) but it's a great way for both NVidia and the companies building on them to build what they want.
ElProlactin 4d ago
A big problem in discussions about Nvidia is that people can't distinguish between: 1. The equity investments Nvidia has made in its customers. 2. The guarantees/backstops it has extended to some of its customers. 3. Vendor financing. The vendor financing is the least interesting of the bunch. Nvidia has already disclosed that when it provides vendor financing, the average customer pays in less than 60 days. These are not long-term financing arrangements and virtually every big company sells on these type of terms (net-30, net-60, etc.). The equity investments and guarantees are where there is room for legitimate debate.