- 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?
It being that size, lasting for that long, and the total lack of viable products created by it are the problem. Financing only adds leverage, that makes every loss or profit larger.
- 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
If their business model thinks they can make a profit doing it this way, why stop them?
The core problem here seems to be that people think your supplier having an equity stake in your company is wrong or risky.
It's irrelevant.
> If their business model thinks they can make a profit doing it this way, why stop them?
I don't think someone needs to stop them, but there are some legit questions that need an answer:
- what happens to all these companies when growth decelerate or stop?
- what happens to nvidia stock when it has to buy back unused gpus?
- what are the risk that a sectorial financial crisis turn into a major economic crisis?
If these were all private entities, I think it'd be okay.
But they're public entities and they're using the pittance of investment as a force multiplier on their stock price, which they're then regularly using to raise capital.
A lot of dumb money in retail investors (as well as corporate) are a big reason this valuations bubble is occuring - which is really the elephant in the room. It's not that the tech isn't real. It's that the valuations behind it have already priced in maybe a decade of profit that hasn't come close to materializing for the LLM vendors; although, the shovel sellers and makers are doing phenomenal - and they have a vested interest to keep the party going with many sweetheart financing/equity deals.
And before someone tells me AI demand is fake and circular, my company is spending thousands on Anthropic a month, up from $0 in 2025. And no, we're not getting scammed by Anthropic or tokenmaxxing for no reason. We are getting value. At minimum, my company is not part of this circular thing.
The problem is that this is simply not enough. They need you to spend tens of thousands, probably closer to hundreds of thousands, before the numbers start making sense.
> At minimum, my company is not part of this circular thing.
You're in the blast radius. And if you don't have a plan for "what if Anthropic hikes the API rates by 10x or worse", you're in the kill zone.
So.. great news for Anthropic, I’ll go ahead and let the elephant in the room go unaddressed
That's not how that works. Their stock price is not directly correlated with them raising capital since Nvidia has not issued new shares (or sold shares on the open market) since their IPO. Their corporate bond is also not based on, or relies on, the stock price since they must be paid back in cash.
But "invest in companies that may grow your own TAM" is an ancient strategy. Sometimes it works, sometimes it doesn't (like any strategy).
I'm not disagreeing with you, just saying it's business as usual.
People have always had difficulty understanding large scales.
I don't feel that I have the expertise to analyse business structures like these accurately and impartially, yet I am under the impression that I have a better understanding than many who confidently talk about it and preach the end is nigh.
Even if the end is,in fact, nigh. It will not render their reasoning sound. They will have been right more by coincidence than judgement.
Webvan, Pets.com, eToys.com, Kozmo.com…all these dot com busts maxed out at less than 0.3 billion dollars in investment/IPO scale before they went under. A good amount of these share similarities with the AI bubble with a lot of them promising to be the e-commerce infrastructure of the future with “unlimited potential” as brick and mortar purchases were all predicted to move online. Webvan was going to be the automated warehouse of the future, for example.
Even the successful giant unicorns look minuscule in comparison. YouTube’s total investment was under $12 million before Google bought it for $1.65 billion, which looks like peanuts compared to these Hertz rent-a-server companies.
SoftBank dumping $8 billion into Uber looks positively quaint by comparison.
Who gives a ** if you've seen it before, it's now a large scale issue. Stop trying to downplay it like it's a book you've read the second time.
What is the end of this sentence?
And if it is, it's not a problem!
And if it's a problem, it doesn't affect me!
As a rule of thumb in life, if someone is managing your money then you should by and large agree with their judgement of the markets.
Interestingly, the Hunterbrook Wikipedia article says that Hunterbrook is unique, and the Muddy Waters Research Wikipedia article lists loads of other organisations. Perhaps someone should investigate…?
(Stock) market is, by definition, irrational. If you are scared of solvency, sell and hold money and/or gold.
The fundamentals are unpredictable, so even a perfectly rational planning (suppose such thing could exist) would lose money sometimes. Not in the long run, but long run doesn't matter if a single wrecked ship can wreck you.
I assume this is just your definition?
Is weather irrational, because you cannot calculate it?
Markets and weather are just too complex with too many unknowns to calculate it.
Besides, I don't think serfom has to do anything with it, as you have to keep people in, while the current agenda is all about keeping people out.
A crash is just another chance of buying more.
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.
There are a few outliers like Meta's basket of currency crypto attempt and Sam Altman's World Coin.
Meanwhile, the entire tech industry has embraced LLMs one way or another.
And tech venture capitalists, Altman and Musk were big boosters of cryptocurrencies.
To an outsider, cryptocurrency cones from the tech industry, despite the fact Apple and Google didn’t bet big on it.
Most of these were in Asia, New York, 2nd/3rd world countries, etc.
I think any association between cryptocurrencies and AI is a lazy one.
It can be useful and also be a complete and utter fucking scam the way it's "produced" and sold.
"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).
The sale of the GPUs by Nvidia to CoreWeave is real. CoreWeave pays Nvidia cash and becomes the owner of the asset, so it's properly booked as a sale. If it can't sell capacity, the GPUs are not returned to Nvidia.
CoreWeave is using debt to make the purchases but the backstop provided by Nvidia ostensibly helps it get better loan terms. That doesn't change the accounting.
If Nvidia has to purchase unused capacity, it simply becomes an operating expense for Nvidia.
Nvidia's exposure is the $6.3 billion backstop obligation and the equity it holds in CoreWeave.
According to the article, the $6.3B is a floor, not a ceiling. And it's not clear whether CoreWeave is actually paying cash or getting the GPUs on credit. If the full amount is getting booked, it's an accounting loophole that's being exploited. If GM sells Hertz a million cars, but says "Hey, we'll buy these back if you can't rent them," can GM book all those cars as actual revenue? What if Hertz only has to pay 10% up front and the rest in 5 years?
The CoreWeave-Nvidia deal is not the same because Nvidia is not buying back the asset (the GPUs). CoreWeave has title to the chips and if they're worth nothing in 5 years, that's a problem for CoreWeave and its lenders.
What Nvidia obligated itself to was buying compute capacity, which Nvidia would be able to use for its own workloads.
In the GM/Hertz analogy, this is like GM selling Hertz the cars and saying "If you can't find renters for them, we'll rent them from you at market rates, up to $x." Under GAAP accounting rules, GM would book the car sales as revenue, the commitment to rent would be a purchase obligation, and if the rentals ever occurred, GM would incur the costs as an operating expense.
There is a question of whether the CoreWeave-Nvidia deal structure is sensible economically, and how much risk is being created. But there's no GAAP accounting question here. At all.
The land owner saying “hey if you can’t sell all the apartments we’ll buy what’s left” doesn’t in any way negate the sale or revenue accounting as per GAAP etc.
If GM promised to "rent out" (instead of buy back) the cars it sold to Hertz as a backstop (if not enough customers are renting), then the comparison is apt.
If GM sold cars to Hertz and then agreed to rent them from Hertz if Hertz was unable to rent them, it would not be consignment. It would be a sale and then purchase commitment, with the cost of the rentals taken as an operating expense.
Is the CoreWeave-Nvidia arrangement "good"? Time will tell. But there's no accounting issue here and even non-accountants can educate themselves on the subject because the least effective way to criticize these deals is to make accounting arguments that don't align to actual accounting principles.
This seems like a really narrow interpretation of what's going on. Is there any room to doubt/discuss whether GAAP rules could be improved? Or why the deal has been structured this way?
Why shouldn't we look through this arrangement? NVIDIA isn't in the business of purchasing outsourced GPU time. They could make better use of unused GPUs by repurchasing them for resale to another customer. If they're not doing that, it already seems likely that they specifically did this to guarantee that the revenue could be recognised.
Sure, NVIDIA's risk exposure could (legally) sit on their books without being recognised until it's already too late. That doesn't mean we shouldn't scrutinize them.
Looking at the structure of the deal and analyzing the risks is perfectly valid. Screaming "accounting subterfuge!" when this is simple GAAP accounting is a different matter.
CoreWeave is buying chips from Nvidia, paying Nvidia full price, and taking title to them. Nvidia has no right to take them back. It instead has a potential obligation, subject to various conditions, to purchase a separate service (compute) from CoreWeave.
GAAP rules are updated on a regular basis. If you want different GAAP rules for this type of deal, you at least need enough knowledge about accounting to make a sensible suggestion.
> NVIDIA isn't in the business of purchasing outsourced GPU time.
This simply isn't true. Google "DGX Cloud". Nvidia has a real business selling cloud-based compute for training foundation models and running heavy AI workloads, and leasing compute from its hyperscaler chip customers instead of competing with them was a strategic decision Nvidia made.
So yes, these types of arrangements should be scrutinized. But to do so intelligently requires a basic grasp of accounting rules and the business models.
To summarise my opinion, subjectively it seems like a better distinction could be made in GAAP to look through this agreement and others like it. (Hypothetically if Hertz agreed to rent back rather than repurchase, like mentioned in a previous comment, that would also be suspect). But I'm not the one to propose what the preconditions would be.
> Looking at the structure of the deal and analyzing the risks is perfectly valid. Screaming "accounting subterfuge!" when this is simple GAAP accounting is a different matter.
It can be legal and still be subterfuge. Everyone involved in the deal has a clear incentive to ensure Coreweave gets to recognise revenue, and gets to show growth on paper. It's the same reason why SoftBank paying OpenAI $800mln for services in 2025 stinks a bit - they don't need the services but the deal goes ahead anyway.
> This simply isn't true. Google "DGX Cloud". Nvidia has a real business selling cloud-based compute for training foundation models and running heavy AI workloads, and leasing compute from its hyperscaler chip customers instead of competing with them was a strategic decision Nvidia made.
Sorry - you're entirely correct here. Though remember we're talking about a scenario where Coreweave aren't able to sell their capacity. If there's such a dramatic hole in demand, who are NVIDIA selling their compute to? This repo agreement won't give NVIDIA capacity that they need in the 90% of cases but will force them to purchase capacity they won't need in the 10%.
s/10%/some other probability/
There's two things here: accounting and disclosure.
The accounting, which is what GAAP deals with, really doesn't seem problematic. CoreWeave is giving Nvidia cash for the chips and taking title to them. There's no associated repurchase right or obligation. So treating this as a sale and booking the revenue is the most sensible accounting approach. Trying to make it into something it's clearly not because it makes some people feel better isn't sensible.
I think the more important discussion is around disclosure: how much information Nvidia should be required to provide about its relationships with companies like CoreWeave, and where and when. Right now, we have to paint the picture based on multiple disclosures. We know about the equity stake through a 13F. The backstop was in an 8-K that was filed two years after the agreement was signed. The equity stake is not high enough that most of the rules around "related party" disclosures come into play.
I suppose you could make the argument that the market obviously sees the circularity here despite the patchwork disclosures that apply, so the circularity is ostensibly being priced in to the stock prices, debt, etc. But there's a legitimate argument that the market would be better served if disclosure was earlier and cleaner.
Even so, none of this would prevent Nvidia from engaging in these types of transactions because there's nothing inherently illegal about them.
NVIDIA itself is also training foundation models (and open-sourcing them). If there is excess compute available, NVIDIA can increase the scale of such models.
I'm not sure this is the case. They are agreeing to pay them some price, it's not clear whether they are getting them for cash or credit but I strongly suspect it's on credit. That doesn't change the GAAP compliance, does it? As I said before, I think they are exploiting an accounting loophole, regardless of whether it is strictly compliant.
With just these 2 comments, now I'm really gonna read that article.
The only profitable company is the one running the scam.
The AI tooling I used 12-24 months ago if frozen in time, monetized correctly is probably 100x the capability of what software could do before (And software was already eating the world long before AI). The bull case is that we just invented the 21st century equivalent of the printing press or electricity. And that website is the 19th century equivalent of someone criticizing electricity as a concept because it would be expensive to build power lines.
If anything it's a miracle that the US economy is so efficient that we can just skip all the small talk and bullshit and build out the infrastructure to support AI immediately.
This is a good take. But then it makes you think - China can build a data center cheaper. Their non-chip cost is likely much smaller. So if there is a down-cycle in chip and memory prices and/or the technology-progress slows, whoever can build horizontal capacity has the advantage.
We have been pushing to the frontier very fast. But there will be a lot of efficiencies found. The agentic use-case has some room to run even if models stay static ie inference needs continue to grow. This puts pressure on the edge that US has of pushing frontier at higher costs. This is likely the AI bear scenario.
But there were printing presses before movable type, and movable type specifically allowed creation of inexpensive books and newspapers. The printing press itself wasn't all that useful alone.
Electricity (in the form of shocking fish) was used by people thousands of years ago and Volta was fiddling with electricity to make frog legs dance in the 1800s; electricity as an industrial property required a bunch of knowledge and material science to make ... lights and motors. Electricity by itself isn't all that wonderful; a flash in the pan so to speak.
So -- what "electric light" or "movable type" is the product of LLMs? I'm sure there are, but ELI5...
I can think of "Summarize this thing for me" and "Elaborate on this half baked idea" -- and honestly "summarize this for me" is actually quite useful. But I'm not sure it is "electric lights / electric appliances" or "indoor plumbing" degree of revolutionary.
0. Pour money on the fire
1. AI somehow becomes AGI because money implies "emergence" I guess?
2. Profit somehow?That said, I'm aligned with you that I'm not clear who is profiting from it other than oligarchs. I'm also quite certain the valuations are fully in bubble territory, pricing in decades of profit I don't see playing out for the LLM vendors. That said, I think it'll be a bit before it deflates.
Way too many regular tech bros making money/invested in it for a reasonable discussion on the topic on HN, imo.
How are we still saying there is no outside money flowing in? Demand is so great that no one has any extra capacity.
And clearly, the more compute we have, the better the results. AI intelligence has not hit a ceiling yet. More compute means more training, more inference, more thinking, more verification, more multi-agent work.
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.
https://investors.coreweave.com/news/news-details/2026/NVIDI...