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Comment by wesammikhail | Hacker News Reader

Isnt that... what circular financing often refers to?

If I invest in you and you use my stack and pay me for it. It's circular. I don't think it should be illegal to do this type of vendor financing/investment or what not as it has its legitimate uses.

But it is circular.

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The money that Nvidia gives to these companies hardly make a dent in Nvidia's total revenue.

It's just to make sure the next OpenAI uses Nvidia stack.

None of this refutes the circular nature of it all, though.

Circular financing is when the revenue you get back is a fraction of what you put in, essentially. If you put in 1$ to get 10$ back in (future) revenue, that's not circular financing.

Yes so advertising and vendor locking. Which brings money back to them. Hence circular.

When people accuse AI companies of circular financing, they meant it as a way to juice up their financial reports.

This is not the case. This is just having influence.

I don't think this locks the startup into Nvidia stack. I don't think this is advertising either. It's just influence.

Circular is not the word I use to describe this business tactic.

Yes but how many such isolated cases are there? There is a real possibility that a lot of the AI bubble is fuelled not by dealing with itself but by pulverizing influence all over the market.

It also makes everyone else’s success theirs. Personally I’m really happy to effectively be an LP in the Nvidia VC fund.

So you’re arguing it is circular but it’s only a little bit of money compared to Nvidia revenue so it doesn’t count?

> So you’re arguing it is circular but it’s only a little bit of money compared to Nvidia revenue so it doesn’t count?

Circular financing isn't inherently bad.

The question is whether it finances productive economic activity OR whether it manufactures the appearance of economic activity.

In this case (gpu provider funding many startups to buy their gpus) it seems bad to me. They have deals with so many customers it looks like collusion to keep prices high on both sides.

It seems so for those who lack critical thinking and think everything is a conspiracy theory to keep the AI bubble alive.

> If I invest in you and you use my stack and pay me for it. It's circular.

If I invest in you SO THAT you buy from me IN ORDER to materially and artificially boost my revenue.

I don't think 1 loop is enough. You could remove the loop by just giving the GPUs directly as part of the investment. But investing in pure cash gives more flexibility especially in time where there may not even been spare GPUs able to be given away.

Having equity in the startup means Nvidia can influence the founders to use Nvidia stack.

Everyone in AI already wants to be using Nvidia GPUs. Unless you worked at Google.

no, circular financing refers to it bouncing through several loops of that. the implication is that it’s system predators working the math, not the business. you should hear it in the same tones that bankers use the word leverage

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