They are going to do a lot more damage then Enron when their bubble pops.
Nvidia is just selling overpriced premium shovels in a gold rush. They don’t care if there’s gold there or not.
Enron went bust by hiding debts. Making a loss is one thing, but lying about it to shareholders (and getting found out) is a one way trip out of the stock exchange.
Regurgitating Zitron with kid gloves.
https://www.wheresyoured.at/nvidia-isnt-enron-so-what-is-it/
Remember that when the news article talks about the economy, it’s mostly talking about rich people’s yachts.
Obviously there are some people nearing retirement age who need their pension plans not to lose value rapidly, they do exist. But the vast majority of the money that is being discussed here, that a bubble might make or break, is millionaires and billionaires savings accounts… So when this bubble bursts and when these companies go bankrupt, to hell with the ultra rich. If we want to help out people who are struggling to live out their retirement because of the stock market collapse that will occur, let’s do that, and let’s just tell the billionaires to go to hell.
Big tech is just trading the same $100b between each other to generate infinite shareholder value.
Man that reminds me of an old comic where two guys give each other the same $50,000 back and forth to eat horse shit and in the end their like, “we just created two jobs and grew GDP by $100,000!” Lol
hot potatoes, but they do need someone to hold on to that 100bn debt, usually other industries outside the tech sector. thats why they peddle it so hard to trump, to be used with palintir, and then other services.
If a company says they are not like Enron, it means they 1000% are exactly like Enron
Yeah. Enron’s scheme was trading money back and forth with itself to inflate its value until it all came crashing down, tanking Enron.
Nvidia is at the center of a scheme involving the entire economy trading money back and forth between a few companies to inflate value, so when the scheme tanks it’ll crush everybody.
Wall Street is Enron now. It’s a house of cards
Me: Come on, pop already. There are funds betting on AI bubble burst, ready for me to invest in.
If you want to get advantage from a speculative fund making a bet on a popped bubble, then you need to be already invested now, before the bubble bursts. (And also, you/your fund need to be right that it’s really about to pop now, and not later)
Once the race is over it’s too late to bet on the ponies.
My “We’re totally different from Enron” accounting report has a lot of investors asking questions answered by the report.
NVIDIA isn’t Enron but they definitely are Cisco.
Nvidia definitely isn’t Enron. It’s all of Nvidia’s customers that are mini-Enrons.
Enron crashed because they were cooking their books and faking income, declaring potential profit where none existed.
That’s not Nvidia. Nvidia is selling actual product as fast as they can make it at whatever price they want to charge.
Nvidia’s customers, on the other hand, are the ones who have to justify buying billions of dollars of product from Nvidia and explaining how they plan to make a profit from that.
Enron crashed because they were cooking their books and faking income, declaring potential profit where none existed
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Sell chips to X
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Receive stock in X
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Value of stocks = discounted sum of future (fake) income
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Booked as an asset on the balance sheet
This is exactly like Enron but the underlying commodity isn’t energy, it’s compute.
Nvidia sells plenty of GPUs for actual money, they are good for it.
No, the real issue is the depreciation for the people owning GPUs. Your GPU will be usable for 4-6 years, and 2-4 of those years will be spent as ”the cheap old GPU. After that time, you need new GPUs. (And as the models are larger by then, you need moahr GPU)
How the actual fuck do these people expect to get any ROI on that scale with those timeframes? With training, maybe the trained model can be an asset (lol), but for inference there are basically no residual benefits.
That’s Michael Burrys thesis. Higher depreciation for GPU owners is a positive for Nvidia because they end up buying more GPUs.
I’m highlighting the the future revenue of those customers that Nvidia has booked in terms of equity. That is equivalent to Enron. Here the SPVs are named companies like OpenAI and other model developers.
enron sold plenty of gas and real things too: it’s the double handling that’s the problem; not the nature of the goods or services
The relative size of the double handling is the potential problem. I think Nvidia is just trying to extend the gold rush for a bit longer.
I feel like what sounds personally insane to us (and is, don’t get the wrong idea), to the people making such decisions the situation is more like -
“Emerging market with unknown upside thanks to new and evolving capabilities, exploration and competitive advantage shaped and constrained, globally, by hardware capability. Not my money I’m betting, ‘risk’ is extreme opportunity for me, negative consequences borne by others. Let’s go”
I’m still rocking a GTX970 from 2014
Do this:
- Calculate the total power cost of running it at 100% load since 2014
- Calculate Flops/Watt and compare with modern hardware
- Calculate MTTF when running at 100% load. Remember that commercial support agreements are 4-5 years for a GPU, and if it dies after that, it stays dead.
- In AI, consider the full failure domain (1 broken GPU = 7+ GPUs out of commission) for the above calculation.
You’ll probably end up with 4-6 years as the usable lifetime of your billion dollar investment. This entire industry is insane. (GTX 1080 here. Was considering an upgrade until the RAM prices hit.)
And the companies faking revenue instead of profit.
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It depends on the customer. Microsoft, Google, Amazon all have the revenue to carry the debts they are taking on. Oracle, Chat GPT, Musk and others are waay more sketchy.
The build out is going to take billions of dollars and these companies aren’t going to see a return for at least 5 years or more. The majors can carry that kind of debt load long term even if AI doesn’t pan out. Other businesses will struggle or go under if AI doesn’t bring the returns.
The next major movers will be companies that do a lot of IT business consulting like IBM. They are going to be busy helping non IT focused firms incorporate AI into their business model.
Finally if all these data centers pan out and the US keeps oscillating between shunning Renewables or Fossil fuels every time a new party comes to office we are going to have major problems with our energy infrastructure. Think energy bills as high as your mortgage within the next 5 years. Invest in utilities or energy companies and try to put solar and some kind of storage on your home.
OPENAI is probably the one that will be set to lose the most, and then oracle? i dont know if palintir fits into this, but THEIls company have been desperately trying to peddle his services to multiple countries already.
NVIDIA is producing and delivering GPUs. However this does NOT translate into income, and that’s what’s making it shady. These companies are paying in shares that will be worth nothing when it pops.
It’s all of Nvidia’s customers that are mini-Enrons.
I don’t think that those are faking profit. Well, I don’t have some comprehensive list, and maybe somewhere someone is, but not for the majority of purchases. It’s possible that they won’t wind up being long-term profitable, but there isn’t fraud involved in that.
I don’t think that the Enron analogy is very applicable in general. Like, what people who are critical of the extent of AI investment are worried about is analogous to the dot-com bubble, where the returns to investors from companies didn’t warrant the level of investment and stock prices for many companies shot way up and then fell back down.
EDIT: It’s fair to say that Nvidia is driving demand for its products. But…that may be quite sensible, since if you have a killer app or two explode, it can drive massive demand for the hardware that runs it. If you have capital available and control the best hardware out there, it may well make more sense to use that capital on building more demand for your product than to go and try and improve the product more. There’s only so many chip engineers available that Nvidia can hire, and unless they want to get into the “writing AI software” game themselves, which would have them compete with their customers, I’d think that that’s potentially a reasonable place to put their capital if they’re trying to improve their business potential.
Nvidia sold a lot of hardware when cryptocurrency became popular. I think that it’s probably fairly safe to say that AI applications have considerably more potential to provide utility than does cryptocurrency.
“We are not Enron, damn it! They were an energy company, we make computer parts!”
That’s such an Enron thing to say.
The irony that nVidia just shifted the narrative from “not enough chips” to “not enough energy” is insane.
I bet Enron also claimed it wasn’t Enron.
OpenAI is more like Enron that NVidia I would assume.
openai has practically no value and that’s well known… nvidia is paying companies to buy their chips and playing bullshit shell games
the difference is openai is a pretty well known unprofitable company, and they aren’t doing quite as much of the bullshit shell games. nvidia is selling to basically everyone, taking stakes in companies, giving weird deals… it’s bloody impossible to track how much of their sales are real and how much those real sales are actually worth, or if those sales are loss leaders for some investment then those investments look a lot like openai
so nvidia not only is invested in a lot of very questionable AI bubble companies, but also their own sales figures are… unreliable
they’re making billions upon billions because they’re using their own money multiple times. it’s kinda like leveraged trading with all the risk and it’s incredible arrogant at the scale that nvidia is doing it
Nvidia is Cisco in this analogy
You can do everything right and still have the curse of investor overconfidence placed on you.
Huang has been complaining for some time that doing well doesn’t result in stock gains, but the actual problem is the stock price is way too high so doing well does nothing for investor expectations.
This is when you sell shares because they no longer have any upside potential.
It sucks for companies though, but the fact is nvidia is overvalued at a 4.5T market cap.
In some ways the victim of their own success, that’s just the way this system is built, for better or worse (mostly worse). The incentives drive the behaviour, but the architecture is hostile in nature, so it’s hard to have different outcomes at a certain level. Infinite growth is literal cancer.
“We didn’t want to inflate our valuation with circular investings, the market made us do it! We are the victims here!!”
*Deploys golden parachute*
he will soon have to deploy one made of AI chips
he’s got nothing to worry about. when they crash down to $1, trump will call it a “matter of national security” or some shit, and then bail them out, courtesy of your tax dollars and my tax dollars. because they actually want the AIs for their police state surveillance
The company doesn’t care if the stock price hits $1. If the company is paying it’s bills, it just continues. It’s the people who hold shares that care. The company doesn’t hold shares in itself.
Enron collapsed because the company financials collapsed, not because the stock price collapsed. That happened after all the bad accounting practises and hidden debt came to light. Now, in that case the shareholders succeeded in suing for their losses, but they only had a case because of the mismanagement.
The company absolutely does own shares of itself and it’s ability to secure credit and just engage in business in general depends of the value of that holding.
No. The board can decide to issue more shares, but this is a sub-dividing of the already issued shares and so normally requires a vote from the shareholders. Major shareholders normally sit on the board, so the two groups overlap but are legally distinct.
If a company buys it own shares, it’s normally a “buyback” and the shares cease to exist.
It does impact employee morale when they get paid with stock incentives and they go to zero.
Of course. They are shareholders.
The company is a separate legal entity though.
You can’t really bail out a stock price though…
I guess you could provide a guaranteed backstop to sellers and funnel the stock to the government, as Trump seems to love doing, but then you end up with a $3T of over-valued assets that you can’t do anything with.
