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Comment by thewebguyd

5 hours ago

Right. The risk isn't accounting fraud, its the equity-to-debt loop that relies on all these companies making "enough money to pay it back someday."

Nvidia invests, that equity check gets used to secure 10x it in debt with the GPUs as collateral, and then they buy the chips.

Nvidia gets paid, so they don't hold the debt liability. But, if AI revenue doesn't cover those debt payments before the GPUs depreciate, the loop starts to unravel, and fast. CoreWeave, Oracle, all the "neoclouds" etc. will blow up, and there could potentially be a ton of PE debt that is now under-collateralized due to depreciation, causing a pretty big haircut to basically all of private credit.

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thewebguyd

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maxdo  4 hours ago

why AI revenue will not cover?

Chinese models pushes prices down and quality up, that makes GPU-based automation more affordable, while covering more and more cases to automate.

You can debate that llm producers will go bankrupt, some of them at least for sure.

How do you lose in this market if you do gpu?

  • thewebguyd  4 hours ago

    > How do you lose in this market if you do gpu?

    You don't. Nvidia gets paid either way. They were never the ones in danger (outside of the buildout going bust and having a massive surplus of cheap, used GPUs flood the market).

    > You can debate that llm producers will go bankrupt, some of them at least for sure.

    And that's the risk that will cascade down and kill off a bunch of companies and cause a debt crisis. If (for example), OpenAI goes to Oracle and says "I promise I'll pay you, at some point in the future, $1T to build my datacenters" and then Oracle funds that build out with debt, and then OpenAI goes bust, or just doesn't make enough money or can't raise enough cash to start making payments on their IOU, Oracle now also can't pay their debt and will eventually go bust, and now the private credit market takes a huge haircut, potentially bankrupting entire funds (like what happened in '08).

  • javier2  1 hour ago

    if the data center builders cant cover debt payments, market will likely flood with cheap data center gpus to cover some of the liabilities.