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.
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.
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.
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.
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.
And the companies faking revenue instead of profit.
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.)
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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.
Enron was cooking the books hiding huge deficits, and spending the money from the workers pension funds, so no Nvidia isn’t Enron, but that doesn’t mean it’s all good.
Enron was the absolute worst, only matched by the Bernie Madoff pyramid scheme and the Bankman Fried crypto fraud.Saying you are better than that is a very bad look.
You can’t steal from employee pensions if you don’t offer a pension
The pension was already stolen before it had a chance to exist.
Joke aside, that’s kind of the vibe it gives off.
Especially since they made the comparison on their own! Relevant article: https://www.wheresyoured.at/nvidia-isnt-enron-so-what-is-it/
NVIDIA is not Enron but they will definitely
looselose a great deal when the AI bubble pops.LOSE
No idea if that was autocorrect or stupidity.
A little of column A, a little of column B.
If you have to protest the insinuation as the CEO of a company in a public forum…Then I think the accusation has already found enough root to at least contain more than a grain of truth. The phrase “He doth protest too much” comes to mind.
Wall Street is Enron now. It’s a house of cards
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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.
Just crash and burn already please, so other companies can rebuild and take your place. Please, for the love of god.
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
In Russia it’s an anecdote about two cowboys with one saying in the end “Bill, I think we’ve both just eaten shit for free”.
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.
Just tell me when the memory shortage ends.
Well, “Thou shalt not create a machine to counterfeit the human mind” was pretty clear in the 1960s but what do I know?
I’m curious. Economically speaking, what would happen if Nvidia pulled a “Steam” and had a “February sale” where some models of video card were discounted enough to lead to a massive spike in sales numbers? A big enough discount to generate a greater total net return on sales for the quarter despite the fact that they were sold at a lower profit margin per individual sale? Assuming limitations like “you must create an account with a residential shipping address that can receive no more than x cards at the discounted price per street address” or some such to limit scalping, would simply showing increased profits do them any good?
Or is the problem due to a lack of product quantity?
Steam can do massive numbers spikes because they have essentially infinite inventory. The whole reason scalping video cards works is that Nvidia can not make as many as people want, even at full retail price. The existence of scalpers implies that Nvidia could raise prices, sell slightly fewer units at higher margin and get greater total return.
Which is why their latest generation of cards costs almost a thousand dollars or more.
I still don’t understand why anyone would pay those prices vs AMD cards now.
NVIDIA isn’t Enron but they definitely are Cisco.
OpenAI is more like Enron that NVidia I would assume.
Nvidia is Cisco in this analogy
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
That’s such an Enron thing to say.
I bet Enron also claimed it wasn’t Enron.
The irony that nVidia just shifted the narrative from “not enough chips” to “not enough energy” is insane.
