Nvidia allegedly engineered scarcity by funding AI startups to buy its GPUs | Hacker News Reader

Nvidia allegedly engineered scarcity by funding AI startups to buy its GPUs

techpowerup.com

1,077 pointsspeckx641 comments

Reading this thread makes me realize that seemingly no one has heard the basic, mundane case for why Nvidia would want to do so much "circular financing" as a matter of totally normal business strategy. This may not be the whole story, but it's worth understanding.

Because of bottlenecks in the supply chain, Nvidia knows it is going to sell 100% of its inventory. They could raise prices quite a bit more, but then their only customers would be hyperscalers (building competing chips) and possibly OpenAI and Anthropic. Nvidia is willing to forgo present day profits for the strategic value of keeping its customer base diverse and promoting the network effects of e.g. CUDA. Instead of quoting a lower price per GPU to neoclouds and startups, they finance purchases of chips, but the two are roughly equivalent (financing means Nvidia takes on more risk, but has more upside and locks in future demand). It is in their commercial interest to have many competing buyers of their chips.

Obviously this creates fun mechanisms for fraud and wacky accounting (and I'm agnostic as to whether that's happening here), but it's worth knowing about the boring/obvious story before donning your tinfoil hat.

>In Berlin during a conference, Huang, accompanied by his top sales executives, broadcast a new message to a half-dozen CEOs of companies that are major buyers of Nvidia chips who were seated around a circular table. He opened with a story that sounded like a fable, according to people who attended. Huang had once found a soup vendor in Japan, he said, with a long line of customers. He joined the line, and after a long wait, enjoyed one of the best bowls of soup he’d ever had. When he asked for another serving, the soup-seller told him no—he had too many customers waiting and not enough soup for all of them.

“He’s a better businessperson than all of you,” Huang told the cloud computing CEOs. The soup-man doesn’t sell out all his inventory to one or two customers, but instead keeps prices high and his customer base diverse, the CEO said.

“You are not establishing the value of my products,” he said.

There are a couple of places like this in LA, where I used to live. Lines would extend around the block and people would join the line just to see what the fuss was about. As a business move it is very smart, but as a customer it has never been worth it. The food is very often average and I could never work out why it was so popular.

Hehehe my pet theory is that Jensen was using exactly the opposite strategy to secure that “avalanche of chips and wafers” from TSMC: Nvidia’s monopoly cash flows give it the volume and money to secure its massive supply-chain advantage by buying priority amongst TSMC’s customers.

That is, Jensen is going to the TSMC soup seller and saying “I’ll buy 80% of all your soup for twice the price because people are willing to pay 10x that with my ramen noodles in it.” And TSMC being the real bottleneck in this industry, knows there’s really nowhere else for its other customers to go. It of course, wants to keep all customers happy… but some will get much more soup than others.

This is probably a huge factor in keeping their advantage over their customers and competitors (but I repeat myself.) That is, TPUs and Trainium etc simply cannot acquire the necessary volume of chips at a competitive enough price-point to put a dent in Nvidia’s grip on the market. But the hyperscalers need all that compute NOW NOW NOW, so they have no choice but to turn around and begrudgingly pay Nvidia for that supply. Which puts more cash flow in Nvidia’s pocket, which buys them more soup, and on this loop continues.

When you ration you keep msrp prices low, and a secondary market emerges. The soup guy is keeping prices low, below what market would clear

no soup for you!

"No soup for you!" SAInfeld just got weirder.

You mean to say Jensen Huang is the Soup Nazi? - https://youtu.be/RqlQYBcsq54

> Nvidia knows it is going to sell 100% of its inventory.

The WSJ article is basically saying the opposite. The hyperscalers are making their own chips and they are buying less from Nvidia.

https://archive.is/20261113091227/https://www.wsj.com/tech/j...

This is my comment in another part of this thread

https://news.ycombinator.com/item?id=50493251#50496483

> Then he went on to describe the situation the company was in. Major cloud providers were running away from Nvidia, making plans to use alternative chips and lessen their reliance on the firm. Even worse, Huang said, the vast supply of chip wafers and memory Nvidia had committed to buying were coming at him like an “avalanche.”

Jensen's son-in-law was making these vendor financed deals and Kress the CFO now interim CEO was against them.

Large customers like Nvidia and Apple want billions of chips. TSMC can't just ramp up and down instantly. It takes 3+ years and $30 billion to build a modern fab. So TSMC has contracts where you are commiting to buy the wafers for years in advance.

I've worked for multiple fabless chip companies that use TSMC to manufacture. Amazon, Google, Microsoft, and the other big hyperscalers are making their own AI chips to move away from Nvidia. The startups like OpenAI are doing the same so the real demand for Nvidia chips is dropping. But Nvidia can't easily get out of the contracts with TSMC to manufacture and buy the chips. They would probably have multi billion penalties that would show up on their financial statements.

Some people think Nvidia is acting as a VC fund for AI startups but my view is that Jensen freaked out about the dropping demand for Nvidia chips. So he is funding these startups with circular finance deals to buy the Nvidia chips that he can't sell to the hyperscalers anymore.

The Hyperscalers are often working with a company like Broadcom (the elephant in the room on this topic) to design said chips. They don't usually have the amount of ASIC and Networking and Optics hardware expertise in house that would be required. See, for instance, Google's TPUs. Broadcom's hardware people are world class and some of the best paid in the business. It's the most elite hardware company in a lot of ways in terms of total comp for top engineers.

Google hires some hardware people to come up with general requirements for specialized stuff like ASICs, then sends those requirements to Broadcom to do the hard parts and negotiates big multi-billion dollar contracts with them. OpenAI did the same and contracted Broadcom after liking what they saw with the TPUs. There are several other Broadcom customers that I'm probably not at liberty to disclose.

But no, as far as GPU replacements are concerned, the Hyperscalers generally are not experienced enough in the specific types of hardware required to do this by themselves. It's very specialized and boutique high price work and more difficult than say, designing an ARM chip (something a company like Amazon or Google could probably handle in house).

In general though, yes, I agree. Hyperscalers are trying to reduce dependence on NVIDIA. Many are quite far along in their ASIC projects (Google especially, they are on their 8th generation TPU! Way past just being a small scale experiment by now.) and have large volumes of them running in place of NVIDIA chips and much more efficiently already.

Broadcom is fabless, and uses TSMC for these sorts of chips. They are mostly a boutique design "mercenary" firm for exactly this sort of specialized hardware for Hyperscaler customers and other clients that run significant amounts of infrastructure in house (so, think JP Morgan for instance). That's the core of their business, along with increasingly Infrastructure Software in the form of virtualization and mainframes and private and hybrid cloud (so some natural sales overlap there, just generally, "big companies that need specialized big data center hardware and software").

When you go into a Ford dealership there is a good chance that you will buy your truck with a loan from Ford credit. That probably helps keep the price of Ford trucks high and Ford makes a lot from loans. And there are problems today with vehicles being repossessed too much because of the long loan terms.

‘Circular financing’ sounds sinister but customer financing and vertical investments aren’t strange or uncommon. It could be bad for sure. But it is not like they invented a new form of wickedness.

Working with a (comparatively small fry) customer who has a $5M grant to buy HGX B300s, current lead time is 37 weeks. This is for a chip which has already been superseded by the R100. NVIDIA has customers lined up around the block, including smaller shops that don't get special treatment.

I don't deal with their big customers, but the idea that NVIDIA doesn't have customers ready to spend $$$$ to get some GPU in their datacenter is proveably false. It's likely easier for them to handle big transactions for big customers, but there's also a loooong tail of customers in line for a smaller piece of the pie.

Recently, I encountered a vendor with a near monopoly. I learned that they’re priced reasonably for new market entrants out of fear of monopsony.

monopsony - a market structure in which a single buyer substantially controls the market as the major purchaser of goods and services offered by many would-be sellers

Also, it's basically putting your profit into an investment (the loan that will have to be paid back) while keeping the inventory going and prices rising

>they finance purchases of chips, but the two are roughly equivalent (financing means Nvidia takes on more risk, but has more upside and locks in future demand).

The other upside is having that equity be counted as capital appreciation in their balance sheet. Even if it's essentially paper loss due to volatility.

Could we also include national security? The people of the US really want to avoid losing to our competition because they are forced to develop their own cutting edge chips. We need the world on our petrodollar and the world’s best AI researchers on our chips. Jackson Polloc is famous largely because the American government created false demand by driving his auction prices up for national security reasons. Lutnick has even been honest, about that. In this case, NVDA and US have aligned interests in NVDA’s dominance, and it seems like being given more leeway to engage in creative if not entirely kosher business practices might be part of a coordinated plan with the current administration.

Or Nvidia was trying to push up the marginal price of the GPUs paid by hyper-scalars/frontier labs and now has to deal with those teams moving off the platform due to cost.

It’s hard to talk about AI economics while looking at NVidia’s margins.

What the WSJ reported is that Nvidia does not know it is going to sell 100% of its inventory, and these deals were seen as a way to ensure strong demand despite cloud providers seeking to reduce their reliance and an avalanche of Nvidia's own purchase commitments. Perhaps that's wrong! But if it's right then I'm not sure there's a good way to square it with the boring/obvious story.

Hmmmm, New Allegations, very likely Sherman Antitrust Laws which involves Price Fixing & Collusion

The Sherman Antitrust Act (Section 1). Did Nvidia allegedly engineered scarcity by funding AI startups to buy its GPUs ?

Not sure that'll work though.

Google and Amazon at least are making their own TPU silicon: Google TPUs, Amazon Trainium I think (goofy name), etc. They're big enough to make their own chips.

Apple is putting their own in-house AI accelerators into their laptops, desktops, and phones for edge inference and the local inference market.

Meanwhile AMD and Intel have GPU offerings. AMD's chips are probably as good as Nvidia, but their software is not... but software is exactly the moat that is vanishing due to AI. Intel's GPUs are mid but are priced aggressively. I actually picked up an Arc with 16G RAM for a very reasonable price to run local experiments and it works great... and I was able to fix the software rough edges with the Intel Arc with Claude Sonnet 5.5. "Hey Claude, take a look at this code... it's not performing well on this system's GPU. Please make a plan to fix..."

I don't think Nvidia's lead is as big as it might think it is.

> the strategic value of keeping its customer base diverse

That's one way to say, "maintain a monopoly where everyone needs you and you depend on no one."

Well funded hyperscalers are trying to reduce dependence on Nvidia. And Nvidia is conversely trying to push into cloud with these credit backstop/revenue sharing deals.

It does make them even more leveraged to the bubble though. If a neo cloud collapses, they're lose customers and gain debt collectors. It's a sound business strategy until it isn't. It's not good risk management, but then you don't become the world's largest company by making safe bets.

It's a good hedge on diversifying customers, but a bad hedge on exposure to fraud. I'm going to go out on a limb and say that Jensen exposed himself to too many frauds here for me to find much of a silver lining in any of it.

> Nvidia knows it is going to sell 100% of its inventory

Isn’t the entire problem here that they don’t know, and they haven’t?

Thank You. I stated something similar in my other reply But at least this gets the top vote which is most important. And I hope more people read it.

And I am just happy this being top comment shows there are silent majority upvoting and sanity prevails.

And it pisses me off the media are all trying to spin it as fraud.

> Nvidia is willing to forgo present day profits for the strategic value of keeping its customer base diverse

That is precisely the opposite conclusion to the linked article though! They aren't "forgoing profits" if supply is constrained. Increasing demand increases prices and thus increases[1] profits. Which of course is exactly what we've seen in the market.

Your point would only work in an efficient market where they had competitors who would take the sale otherwise.

Basically: trying to sell this as NVIDIA being a Good Market Citizen and making sure everyone gets a chip is... well, it's kinda naive. No, they're really obviously making an extra buck on the market they already cornered.

[1] Superlinearly even, since the companies they fund can drive further investment based on the whale they landed.

Interesting how much energy is expended here finding excuses for this unusual and borderline fraudulent strategy from Nvidia.

Is it really a conspiracy theory to think this level of circular financing is suspect? Prominent journalists and economists seem to think it is suspect.

Oligospony avoidance seems quite strategic.

What is the point of the opening part of your first sentence, "Reading this thread makes me realize that seemingly no one has heard..."? Why do you need to take a snipe at the commenters so far before making a perfectly valid point? You could have just made your point.

And it's totally fine if someone hasn't heard it before. That's why we read comments in places like HN. To learn.

Honestly wether the AI ecosystem created market bottlenecks by accident or intentional is irrelevant. The question is wether they exploited the situation or tried to mitigate. Observation mightily supports the former.

You should call this belief "Effective Altruism: Founders Edition"

What you're describing is the belief that they'll always sell their GPUs for a profit, so it doesn't matter what rules of accounting they violate _today_ because they'll be effectively more valuable _tomorrow_.

The same way an effective Altruist will poison a town's water supply if it grants them billions of dollars in the future and allows them to buy the town bottled water at some interdeterminate point in the future.

It boils down to the belief over reality, and feelings over facts; essentially, you're saying "as long as their intentions were good (gpus for everyone), it doesn't matter how much they hurt everyone"

I think this conflates the idea that - Sometimes conspiracies are boring. "I did a thing because of the boring, mundane case that it benefited me" is - while not sufficient for fraud - it is one of the building blocks.

And clearly one of the building blocks of cartels, monopolies, etc.

the point being "Boring and mundane" isn't a sufficient defense.

I think this is reasonable, but it doesn't necessarily make the endgame look any better.

A very similar thing happened to Sun during the dot com boom. All of these start ups were scrambling for Sun servers, and when the bubble burst, not only was the market flooded with lightly-used secondhand servers, but cheaper alternatives grew market share at the expense of Sun's expensive products.

Even if you believe in all the super AI and magic that is coming, I still don't see how you avoid a big shakeout (which has occurred in basically every historical boom: railroads, cars, PCs, dot com, etc.) that drastically reduces the number of NVidia customers.

This is third source reporting. WSJ does the original, Wccftech reports that WSJ reports, now Techpowerup reports what Wccftech reports about WSJ reporting.

ORGINAL is the best. It tells completely different story better (not a weird twist where CEO trying to increase sales and price of their product is suspect)

Before His Ouster, Jensen Huang Belittled the Executive Replacing Him --- Interim CEO Colette Kress has questioned some Huang dealmaking. He called her ‘a deer in the headlights.’https://wallhop.io/https://www.wsj.com/tech/jensen-huang-col...?

https://wallhop.io/https://www.wsj.com/tech/jensen-huang-col...?

Stuff I did not know:

(circular financing)

>Huang had launched a dealmaking spree and was now starting to question whether it had gone too far, according to people familiar with the matter.

(neopotism, Huang’s son-in-law, Nico Caprez)

>Huang’s son-in-law Caprez and another vice president Raj Mirpuri told prospective business partners that Nvidia could arrange credit-support deals within a couple of weeks. Dozens of companies lined up for this program, hoping Nvidia’s backing would lower their borrowing costs. In exchange for providing credit support, Nvidia proposed that cloud providers share a cut of their revenue.

>Behind the scenes, she [Kress] tried to rein in Huang’s son-in-law, who had been promoted to a vice president in January, people who worked with her said.

(...)

>By October, Nvidia started to turn off the tap.

> [Story about Japanese Soup vendor] The soup-man doesn’t sell out all his inventory to one or two customers, but instead keeps prices high and his customer base diverse, the CEO said.

People have been mentioning about how all of ai is a circular financing scheme for months. Anthropic, openai, meta, etc. they all have been meeting with one another and making really insane deals. I am curious what the details are specifically, but I am shocked to find that anyone let this go on this long and only now decided to act.

It would be historically entertaining if all the ai hype crowd found out they have been hyping a ccp scheme to crash the us economy to the point where even the military was cheering it on. But the truth is, this is just how business works now that billionaires and trillionaires can do what they want.

I want what's best for the US but acting this slowly puts any meaningful repercussions for this behavior into the realm of theatrics rather then lessons learned. Oh well I guess some people got really wealthy so we should all be cheering while the price of food and everything else is insane.

>Stuff I did not know:

>(circular financing)

How? This was common knowledge many months ago. Oh, right. Filter bubble. Like this video, which explains the insanity. 3 updoots.

https://news.ycombinator.com/item?id=47306898

I guess if you only read a silicon valley cheerleading site like this one, you may be blindsided by the facts.

Major cloud providers were running away from Nvidia, making plans to use alternative chips and lessen their reliance on the firm. Even worse, Huang said, the vast supply of chip wafers and memory Nvidia had committed to buying were coming at him like an “avalanche.” https://archive.is/20261113091227/https://www.wsj.com/tech/j...

Wallhop doesn't work for WSJ anymore, here is the alternative: https://archive.is/20261113091227/https://www.wsj.com/tech/j...

I was able to read the whole article from the wallhop link.

> He called her ‘a deer in the headlights.

if this is true the stock swing might be a reasonable reaction to the uncertainty of a massive directional change for NVidia. And maybe too late given the hyperscalers have had enough time to start pursuing their own chips.

Circular reporting about circular financing

> ORGINAL is the best.

Then purchase a subscription and don't use paywall bypass links for articles. Or you won't have any articles longer.

or change your expectations on what authoritative journalism is, where it can be from.

Those people need to be paid, too, but the options are way more flexible and accessible.

Honestly, terrible reporting all around this issue, especially by NYT and WSJ. Then all the other news sources repeated the same lies.

- Singapore govt issued a statement clarifying that WSJ fabricated facts. [1]

- It's been clarified now by the President's Council of Advisors on Science and Technology that there is no convincing evidence that Alice Huang is a spy. [2]

- The statement that Jensen called the new interim CEO ‘a deer in the headlights’ actually hurts NVDA stock, as it lowers the confidence of investors in her and I'm sure WSJ knew that before posting this speculative article with no cited source.

This looks like a hit job on Jensen and Nvidia. NYT and WSJ have spewed false facts with no credible sources (just "anonymous" sources) to discredit Jensen as much as possible and hurt NVDA stock. Jensen probably cheated on his wife, but mere cheating is not grounds to remove a very competent leader from the company he created.

[1] https://www.mha.gov.sg/media-room/newsroom/clarification-sta...

[2] https://x.com/DavidSacks/status/2121070881258504395

> It's been clarified now by the President's Council of Advisors on Science and Technology that there is no convincing evidence that Alice Huang is a spy. [2]

Anyone appointed by the current Trump administration can't be considered a reliable source. Neither can anyone else with a vested interest in the GPU/AI/datacenter market.

Maybe the spy accusations are bullshit but nobody should take Trump's cronies' word for it.

Why would anyone believe anything David Sacks says?

I thought we knew a year ago that nVidia was doing circular finance?

https://www.theguardian.com/technology/2025/dec/28/nvidia-in...

Most bubbles you see coming from a mile away. You just don't know how many miles away the actual pop is.

It is also so lucrative to participate in a bubble that if you focus too much on the problems you will miss out.

I think part of a bubble is knowing the problems but participating anyway. Over time then the problems start to feel normal and while things are good you rationalize why maybe the problems aren't such a big deal after all.

When a bubble pops, the pop typically takes years to happen. It's more of a slow deflation in most cases. Afterwards, you can easily spot the peak that would never be reached again but, during a "pop", it's not clear if you're past that peak or if you're just experiencing a momentary blip on the path to new highs.

Nvidia is likely not going to surge back to $240 soon. It might go lower actually. Skeletons are still falling out of closets. Huang may have been the tech founder's tech founder, but he kept some pretty nasty company in recent years and, as we're now finding out, got both himself and his company into shady territory. As it turns out, ethics are not just for aesthetics.

Is Nvidia slowing down for a year or two bad for AI as a technology? Probably not. Nvidia could find a leader that will return them to top form, or another company could take advantage of the situation to catch up and surge past. A lot of AI researchers have been calling for a pause or, at the very least, a slow-down. This might be just what was needed.

However, given Nvidia's utterly unique position as both hardware supplier and bank for the data centre build-out, what will the impact be on the rest of the AI sector? The market is going to have to price in a weaker and slower build-out as well as a loss of trust in Nvidia. That's clear downwards pressure. Is it a blip, or are we now past the peak?

Yep. Slowly and all at once.

Even if you know the timing of the collapse of a cataclysmic bubble what do you do?

All of the investable assets will collapse at the same time. Inflation will evaporate cash. Bonds will worth nothing (if the us gov bothers to repay them).

Nobody can see a bubble. That's why it's called a bubble!

Then why am I having trouble getting the GPU capacity I need?

Does the math check out, though? For reference, Nvidia added $17B of non-marketable securities in 2025, and its total revenue was $215B. So, assuming all these equity investments went to GPU purchases, they only amount to 8% of its annual revenue.

Since these firms (neoclouds and AI startups) will get consolidated if Nvidia puts too much money into them, I assume the majority of their funds are coming from elsewhere.

17B sounds low.

> Corporate development-led AI equity investments alone exceeded $40 billion in just the first four months of 2026

The accusation in the headline is that this activity contributed to the general shortage of GPUs which would, if true, increase their pricing power and profit margins even on chips sold to other customers. So I don't think it's a direct comparison to their equity deals.

Is this the only reason Nvidia made money? No, obviously. But is it adding fuel to the fire? If there is a bubble will this make the fallout worse? Seems likely.

More importantly this suggests a second plausible reason the board might have wanted to wrest control of the company away from him. (The other hypothetical one being that he was doing illegal stuff.)

According to Gemini, Nvidia added $43 billion in direct equity stakes,$36 billion in AI compute partnerships, and $100+ billion in loan lease guarantees, which works out to $63 billion this year, $20 billion for the next 3 years, and $10 billion for the last 6 years based on it's assumptions.

So about a third, a sixth, and a twelth of their annual revenue respectively.

I think the larger concern is that both the revenue and assets/agreements depend on Nvidia maintaining sales, market share, and their share of capacity at TSMC/etc... If they run into trouble on any of those fronts, their revenue and assets could take hits from multiple directions.

NVIDIA appears to have made $530 billion in commitments and guarantees as of last August: https://cellcog.ai/blog/nvidia-530-billion-commitments-guara...

if circularly financed neoclouds are 5% and singapore china flow is another 12% things suddenly dont look so good

I just am unable to understand whether it's a bad thing or not, you could frame it as being circular, but you could also see it as Nvidia simply giving hardware in exchange for startup equity, is that really fundamentally problematic, is it the scale at which it was done, or is it a valid but risky tactic?

It wasn't just startup equity. For example, they are backstopping agreements between customers and to-be-built data centers, so the companies building the data centers can get better loan terms from the bank.

All told there have over $500 Billion in equity deals and "future commitments" like above since July and even more after that.

Even for a $4 Trillion company, that's still quite a lot.

IMO Jensen's affairs might have been leaked because of him being out of control and making too many deals like this. The board might have wanted to fire him, but not say the real reason.

The scale is the largest factor, I think. If vendor financing is happening in a mature multi-vendor market on a small enough scale as to not constrain supply, it’s a less unhealthy situation than when there is only one vendor.

There’s a ton of circular financing in AI but I don’t see this as part of that. Circular financing is more like companies passing IOUs around. This is more like VC funding which is pretty reasonable imo.

Maybe it's their unique position as a bubble signal? Everyone is watching them for a sign.

Why is Nvidia financing neoclouds to buy Nvidia chips to rent to AI customers instead of owning the DCs themselves? At least it was my understanding that run their own DCs for GeForce Now for example

You might as well ask why they don't just keep all their GPUs and compete directly with Anthropic and OpenAI to make frontier models. The answer is the same, Nvidia's core competency is hardware and although they dabble up the stack they would rather stay focused on the GPU business. It also provides a degree of separation where they can bet on many different neoclouds and AI businesses, and some may fail but there will be survivors and winners.

Well, they own chunks of Coreweave and Nebius I think?

They want to sell the shovels in the gold rush - gold extraction is a different, riskier business.

Just like we knew for at least a year already about the sales through Singapore. A lot of people called it for what it is at the time already (see for example: https://www.ft.com/content/6b1ce190-24d4-4f39-a518-ef9dae5fa...). And yet, things unrolled very slowly, then suddenly.

My theory is that once new CEO is found, especially if he comes from the outside, he will be highly incentivized to denounce past sins and disclose as much as possible to start with a clean sheet. I would bet that this is one of the main reasons the stock is tanking. House of cards is about to collapse, and that may be the trigger.

> My theory is that once new CEO is found, especially if he comes from the outside, he will be highly incentivized to denounce past sins and disclose as much as possible to start with a clean sheet.

Very much this. If you read the article it mentions that the current acting CEO was against investing into startups and disagreed with Jensen Huang.

People pointed it out as early as 2023...

What separates a company trying to “pump sales” through “circular financing” from a company with bucket loads of cash investing in startups who use their products?

How about companies who heavily discount their product to startups to support new uses for their products because it could create new demand?

I’d say “is Nvidia the only investor in this company?” If not then clearly other investors feel like the startup is an investment.

It’s a hell of an allegation to say it’s a pump and dump scheme since those same behaviors can just be smart business practice.

Why should there be a separation? If the startups using their product wouldn't have survived on their own or found other investors injecting as much money, that's a huge sign of circular economy.

We did but people simply keep pretending it’s not happening.

Between the circular financing and behaviour some analysts call “channel-stuffing”, it does seem that with Jensen Huang gone, the music is perhaps about to stop.

No one seriously denies the actual activity was happening, they just dispute its implications, and for good reason. Vendors frequently extend financing with the hope of making more sales, the most obvious example being auto loans and BNPL

It was talked about for so long people stopped talking about it because it got a bit boring and felt futile, in a "I guess money is fake when you have enough of it" way. It's _incredible_ it's coming out now, if I can excuse going tinfoil hat for a moment, it's like they're trying to pin everything on Huang while they have the chance.

Cisco did the same circular finance during 1998-2000 dot com bubble and Cisco crashed after that.

I mean this is their second foray into making a bubble. See bitcoin GPU price craze.

And yes Jensen lied to shareholders that GPUs aren't that tied to Bitcoin while they were selling trucks of GPUs to interested individuals...

Charles Ponzi says hello.

Nvidia wants to ensure data center companies that are optimized for AI like Nebius stock their buildings with Nvidia chips instead of AMD or ASICs so of course it is smart business sense to partner with them or take stakes in them.

Nvidia gives Nebius first access to their newest chips, ensures they get deployed at top performance, allows Nvidia to recognize the revenue upfront, and ends up owning equity in the upside.

Nebius gets the best chips first, gets cheaper financing due to the obvious security granted by having one of the most valuable companies in the world standing behind them, etc.

It sounds like a mutually beneficial deal rather than something shady to me.

By the way they report demand is 10x supply so I think everyone in here hoping for some cheap GPUs soon is kidding themselves. Eventually RAM might get cheaper because it's easier to build new factories to produce commoditized RAM but TSMC is the bottleneck for advanced chips and it isn't resolving anytime in the foreseeable future.

I'm buying the dip from this silliness.

Mutually beneficial to those two parties but not to the market, means us, mere mortals, too.

Do you base your personal decisions on what's good for the greater market?

Is Nebius an AI startup?

Nebius is down almost 60% in the last 3 months, this doesn't seem like "the dip from this silliness"

Grandparent is probably talking about NVidia.

> NVIDIA on the hook for an "avalanche" of GPUs from TSMC

It doesn't really sound like a TSMC bottleneck to me...

Right, that quote kind of undercuts the whole scarcity story... Sounds more like the chips were piling up and the bottleneck was power and buildings, so financing the buyers was a way to get the inventory off their own books.

> I'm buying the dip from this silliness.

Nobody cares, this isn't WSB.

Everyone is talking about the circular financing but this is the key takeaway from the WSJ article for me.

Jensen's son-in-law was making these vendor financed deals and Kress the CFO now interim CEO was against them.

> Nvidia can't easily get out of the contracts with TSMC

So, supply was committed, but demand was not. That explains actions like these [1] to finance demand. The challenge for them from a business point of view is to dominate datacenter footprint with increased supply, while balancing demand with high margins - in the face of increased competition. I would guess that the marginal demand from startups and neoclouds is already inflecting downwards due to funding constraints and datacenter bottlenecks.

[1] https://www.cnbc.com/2026/08/10/nvidia-wall-street-asset-man...

Indeed, and combine all of that with this stuff going on:

https://www.tomshardware.com/tech-industry/artificial-intell...

https://www.aienos.com/cudaplusplus/

https://engineering.fb.com/2026/04/02/developer-tools/kernel...

https://cloud.google.com/blog/topics/ai-infrastructure/torch...

https://finance.yahoo.com/markets/stocks/article/google-to-s...

I would say it's probably a complicated time to be Nvidia in general.

It doesn’t make sense anyway since those smaller companies will doomed against competition with the vertically integrated companies right?

So nvidia either has to lose by selling for cheap or by their customers going bankrupt?

You are thinking long term.

I think Jensen was thinking shorter term and Kress the CFO was pushing back.

But if you ask me to predict what will happen, 70% of the AI startups will go bankrupt, 20% of them will get bought by bigger companies, 10% will succeed on their own. That's just my generic take on tech startups in general.

This article is 6 months old but basically Jensen is saying the US should keep selling chips to China so that we don't force them to design their own AI chips. That would be bad for Nvidia sales which is the same thing that is happening with US hyperscalers moving away from Nvidia.

https://www.tomshardware.com/tech-industry/nvidia-ceo-jensen...

As long as the market keeps buying into the bubble they are safe.

And for them at worst I'd imagine they get their GPUs back and have to it sell on modest markup instead of 1000%+

40 year old gamer here having a flashback of all anti- competition practices Nvidia sustained for decades. Who here remembers GameWorks and PhysX effectively sabotaging multi-vendor optimization in titles like Witcher 3 and Watch Dogs? Expensive Gsync monitors? Trying to force OEMs to be GeForce partners in exchange for full GPU support? Forcing EVGA exit from the market? And then completely shafting gamers when crypto and AI markets opened up?

Another 40 year old gamer here. I remember all of it. (https://www.youtube.com/watch?v=ZcF36_qMd8M one my fav videos on the matter)

I also had the displeasure to work with nvidia. After years of pushing gaming cards on us for compute, the years I spent working with nvidia was full of conversations where they would list silly excuse after excuse as to why we should use the expensive enterprise-grade cards instead. All the while, we begged them to unlock driver features that were available to Quadro cards but not GeForce cards, features as simple as hardware acceleration pass-through on a remote desktop connection. It took them a full-on epidemic, where remote work became super common, to allow some of those features to GeForce cards.

So it's really on brand that they tried creating a fake scarcity to keep their prices up. I don't envy the situation Jensen is in but I won't be sorry for him.

Thanks for sharing the video. What's funny is that YouTube tagged a 10 year old video as AI-generated. Google is another company that's fallen hard from grace.

> I don't envy the situation Jensen is in but I won't be sorry for him.

Connected. Complete lack of integrity.

If he cheats on his wife, and on his customers, he'll probably cheat on his shareholders. Hence having to quit before he's pushed.

Not defending NVIDIA by any stretch, but I think Intel is the only one that allows ‘enterprise’ features on their consumer cards, like SR-IOV.

Such a complete failure of the market that NVIDIA hasn’t had any real competition. All of the vendors abandoned PC gamers though. Though the price choke point is memory, not cores.

Which makes me curious, if AMD did another HBM-based card like the Vega series, would that RAM be cheaper now than GDDR?

> https://www.youtube.com/watch?v=ZcF36_qMd8M one my fav videos on the matter

Weirdly, Youtube has labelled that video as "AI".

Which is kinda hard to imagine, seeing as it was released 10 years ago.

Owning three percent of one of the most valuable companies in the world is a completely unbearable situation to be in.

There was an article on here just a few days ago about an Nvidia crypto GPU that was sold a few years ago. This lady discovered that via voltage glitches she could turn back on features that Nvidia had turned off. She had cards that were sold with only 8 gigs of VRAM enabled that actually had 80 gigs of VRAM.

Yeah I never really shared the adulation the AI community still seems to have for Jensen. To me he was always a sleazebag.

This was the discussion - https://news.ycombinator.com/item?id=50451903

selective binning of semiconductors is not a new or inherently evil practice. that being said, someone managing to get a 170hx to 80 gigs is possibly the most prominent example of unlocking manufacturer restricted features.

As another almost 40 year old gamer, I find myself wondering why nobody else ever brings up 3dfx when discussing Nvidia. I've been salty with them since the buyout and I've remained an ATI/AMD user all this time because of it.

3dfx destroyed themselves by falling behind in the GPU race. Their later products were second rate. Nvidia just bought the corpse for the patents.

Yes I (also) had 3dfx shares that went almost worthless overnight in December 2000 (here in Europe).

That is suggesting 3DFx does not allow support Glide for other graphics card. and Apple Lightning Made for iPhone programme is as bad Gsync Monitor certification. When they were the one to ensure quality matters across the whole spectrum. Just the same as Apple. And the reality it is just business.

Have they been pushy? Hell yes, I guess everyone have a different line on this. But on the scale of business partnership and leaving money for its ecosystem, Nvidia is far from the worst. Just look at Apple, or in other industry, Walmart. ( Note: Steve Jobs used to be pretty good at that, the same as Jensen. It was actually Tim Cook who pushed this to previously unseen level )

>And then completely shafting gamers when crypto and AI markets opened up?

I believe Jensen was the one who continue to push capacity in Geforce for consumer market when they could have done 100% AI. And there just isn't enough capacity for everyone. And had AI and Crypto not been that popular the R&D cost of amortised over GPU would have been far higher on leading edge node with Big GPU design, often pushed to Reticle limit. Not only have I recounted exactly zero appreciation on any technical forums, consumer simply want their GPU to be faster, cheaper and widely available every single time regardless of its cost, when it was Nvidia who is pushing the whole GPU industry forward.

> I believe Jensen was the one who continue to push capacity in Geforce for consumer market when they could have done 100% AI

Investors like it (a lot) if you have diversified income streams. Sure, currently gaming is not the profit driver for Nvidia but it still adds to the valuations and having a Cuda capable GPU in a lot of homes is great for the ecosystem.

With AI cards languishing in warehouses I don't think that's the case.

And if they didn't wanted dual use "problem" they could've chilled on AI cores in their chips and went all in on 3D performance.

> And there just isn't enough capacity for everyone.

You are in a comment thread related to an article about Huang intentionally engineering that shortage by investing into AI startups. Why do you need to defend a billionaire?

And recently, claiming that DLSS (multi) frame-gen doesn't work on 20xx and 30xx cards despite modders being able to implement it.

Nvidia is a business but them having a (near) monopoly has absolutely been horrible for gamers.

54 year old TF2 player here, I do remember.

NVIDIA has been terrible to countless groups over the years(even more than you listed). They survived by being really good. You know who else have been jerks? Every other leading successful tech company (NVIDIA is nothing compared to Microsoft's misdeeds for example). Microsoft still going after 51 years. And now a new generation having never remembered the browser wars have fully embraced Microsoft products like VSCode. Your trip down memory lane reminded me about the numerous 'gamer boycotts' that all failed. There used to be a meme about how people signing a pledge boycotting a title would then be seen 'online' on Steam playing said game. At the end of the day most consumers didn't care. They wanted the best products and NVIDIA more often than not delivered. A company that is super polite to all their customers and partners is a company that will still be dropped the second their products stop delivering the value that customers expect.

True. As much as we hate on companies like Microsoft and Nividia, or people like Bill Gates and Elon Musk, it has to be acknowledged that above a certain level, it's a eat-or-be-eaten world, and I'll never reach that level.

Google used to be not jerks, Valve still are. HP - often considered the company that started Silicon Valley - were somewhat famously not jerks for a long time, but that ended decades ago when Hewlett and Packard left.

Remember when "but PhysX needs special Nvidia GPU technology"...just so we found out PhysX didn't even run on GPUs?

well, it could run on gpu

Not to mention the benchmark cheating, which I believe we see today with LLM models too, just not via drivers.

Add false advertisement (GTX 970 3.5+0.5 GB VRAM debacle) and blatant benchmark cheating to the list too.

Yup, they've been sleezebags all along. Nvidia has always treated their software as a tool to nobble the competition.

They're just another rank monopolist. We should celebrate their fall, maybe there will be room for some real competition.

>We should celebrate their fall, maybe there will be room for some real competition.

How are you going to get more competition when the entry cost is so high? The only competition will be the Chinese willing to dump endless cash into this but they are not doing it out of the goodness of their hearts either and it will still take years. If NVIDIA starts to falter then in the short term things will get even more painful for consumers as AMD becomes the new crummy company people love to hate.

I always thought that Nvidia's presence in the Khronos Group was a farce. On one hand they were vendor-locking as much as possible at the expense of the industry, and on the other they were "contributing" to the open languages and protocols.

"The reason behind this was to maintain the perception of ongoing high demand and to move an oversupply of semiconductors from TSMC."

Huh. The circular financing was figured out a while back, but this is something I had not seen before.

This could all work out. NVidia stock drops. AI company stock drops. The more efficient approaches to inference and more open models take over for most mid-level applications. The need for insane numbers of data centers is reduced. AI works fine and costs less.

I am not entirely sure how this is circular financing. And how it is creating supply and demand curve bent to Nvidia's will.

These Startups or companies wanted Nvidia's GPU. Nvidia is helping them to finance it. That is basically Apple Upgrade programmes using the companies share and its GPU as collateral. Had zero start up being using Nvidia, the demand from Hyperscaler alone is enough to fill up all the current supply. And that is ignoring Gaming market.

This largely works because the current AI bubble demands drive the market price of Nvidia GPU to new heights ( along with RAM price being 5-10x of that is was ). Nvidia commands margins of its GPU allow them absorb and finance this operation with relatively very little risk.

The claim is nvidia is making the chip shortage look severe by overbuying chip production - and then pushing those chips downstream at artificially high prices using circular financing.

Of course the question is: is there an actual chip shortage or not? How much of Nvidia’s strategy creating a fake shortage? Just noticing there’s a shortage isn’t proof that a lot of it isn’t artificially manufactured.

Doesn't this make Nvidia a VC? Are they a good one?

What happens if/when most of these startups fail?

I agree completely. Nvidia is clearly trying to diversify its customer base, not least because all their big customers are developing their own hardware to compete with Nvidia chips.

Larger supply of capital means lower cost of capital for the borrowers. Would these startups have been viable without lending from Nvidia?

At the end of the day, these arrangements are a sort of discount on GPUs. Is it a good sign if Nvidia needs to give discounts to sell their GPUs? Do we actually have an oversupply of GPUs if Nvidia wasn’t manipulating the market?

I see it more as leveraging (and also diversification). NVIDIA gets a pile of money. Rather than sitting on it for no purpose NVIDIA doubles down on AI success by purchasing ownership in AI companies that use its products (although not exclusively its products).

This way even if some other hardware eventually powers AI, NVIDIA will still benefit. The only thing needed for NVIDIA to continue doing well is AI as a whole to continue doing well. Which is almost given.

The fact that well financed NVIDIA customers now buy more NVIDIA products is additional benefit. So what NVIDIA is doing financially seems like a no-brainer.

More efficient models run on consumer hardware, cutting out the need for datacenters and nVidia to some extent.

I have no investment in Nvidia and have no reason to like them or hate them.

But I think this is backwards. I remember 4-5 years ago waiting for AWS and GCP to schedule us an 8GPU machine (gcp had 16 even) for hours while paying them crazy rents for the GPUs that paid the hardware in 2 months of usage. This while components and servers were actually cheap.

The hyperscalers are monopolies that eventually some admin will grow balls and will have to break up. But this is wishful thinking and nVidia didn't do a bad job working them around. Now with other monopolies drying out components like RAM from the market, one can actually rent GPUs with less effort from neoclouds.

It doesn't seem like anyone's going to be breaking up any monopolies in the US anymore in the near future, if ever, excepting some really massive sociopolitical shifts.

And thus nVidia were right to invest in neoclouds. Somehow agreeing to be squeezed would have been the worse option

Mm, willing to bet you have significant investment in Nvidia via index funds.

I live in Switzerland and I am not directly invested. But the Swiss national bank owns many us stocks. Pretty sure we are all somewhat connected to nVidia.

Jensen & Nvidia were never AGI / ASI pilled.

As a result they never seriously pursued frontier research for open models - which could have easily absorbed any excess compute they planned for.

On the other side their customers are rapidly becoming their competitors and will happily eat up spare capacity at TSMC if nvidia can’t fulfill its obligations.

Edit: to be fair there are several counterfactuals that could have played out negatively if nvidia decided to go into frontier research or go upstream like Elon and build their own fab. Jensen himself said they were completely focused on building general purpose compute and his bets had turned out to be right so far.

To be fair their Nemotron models are pretty good. The Parakeet speech-to-text model is also pretty good. That being said these pale in comparison to the frontier labs. They should've invested more into it, but I understand that they don't want to piss off their biggest competitors.

A friend of mine works on Nemotron. He stated quite plainly that they intentionally don't push the boundaries for the reason you state. It's similar to when companies create reference designs that show off the features of their real product, like Google and their Pixel phones

What would investing in the models give them ? They already are selling chips at massive markup.

Investing in tooling so more people get on their stuff is direct return, but having yet another AI model is of little value aside from being a test bed for their AI tooling

* they don't want to piss off their biggest customers.

what's asi

artificial super intelligence ... it's AI that's (vastly?) better at everything some human could do, I think.

Jensen said AGI is here when Astra was released...

https://fortune.com/2026/09/09/markets-agi-nvidia-singularit...

I wouldn't disagree with that. Astra was the first model that is actually really smart, doesn't constantly hallucinate, writes high quality code etc.

If it isn't AGI, it's at least something that shows that "AGI" is not a useful label. You wouldn't argue that we don't have Artificial General Flying because planes can't flap their wings.

Worse, I think companies that warehouse gpu's will buy newer more efficient gpu's by the time they get their data centers running but won't resell the older but unused gpu's afraid to let their competitors to make inference.

The cost of GPU is high enough that it costs like decade+ in power, power efficiency is not a major factor on return on investment.

Clouds are offering previous gen GPU capacity just fine

Isn't that straightforwardly explained by typical hoarding behavior, not " afraid to let their competitors to make inference"? During the pandemic people were hoarding TP that they couldn't possibly use within a reasonable amount of time, but it'd be crazy to accuse people of doing that because they were afraid of their neighbors having clean asses.

Simple. If everybody stinks, nobody is stinking.

If you cannot wipe efficiently, you better make sure nobody else can too so that no-one can call you out on that.

Lots of comments seem eager to declare everything over, done for, and said, and that doesn't seem to be nearly the case. The eagerness to declare it over is, I think, reflective of a desire not to examine the idea that actually the GPU demand really is there.

Maybe the real retrospective on this will be on how the news was able to forward such shaky narratives around financial doom for so long despite the underlying facts not matching.

Half the room is still entirely against this AI thing on an ideological basis. I have observed several developers using AI tools badly on purpose (malicious compliance) in order to further the narrative that this could never work out. The prospect of some AI 9/11 transpiring (they even halted the flights) is hope to these people. A certain cohort needs it to fail.

"Those who don't build must burn." - Ray Bradbury, Fahrenheit 451.

I don't care for Nvidia, witness all my PCs using AMD cards for ages and never wanting to buy their stock because some of their practices I disliked.

But I think this is at least to a degree tinted hindsight - it generally makes some sense to have an interest in funding customers who might grow to be even bigger customers. And it's been totally public for ages.

AMD is smart enough to just slash their consumer GPU output by 80% and directly spit in their consumers' face, rather than supposedly go through this game.

If that's what the demand curve looks like, it's unfortunate. But at least I can plug in and play or nearly so all their chips on Linux.

Literally ever large company creates programs to fund extended development and therefore demand.

Google is constantly trying to give me free credits. They could give me the money (circular) or give me the credits (usage + write off).

Companies that receive Google credits get a possibly taxable benefit, the service is 'consumed', Google gets the write off etc..

Well, Nvidia knows every other established cloud provider is developing their own in-house training and inference stack.

I’m pretty sure Jensen is not the kind of person sitting around while AWS strip-mines his tech.

Crowding out the datacenter buildout with neocloud backed by Nvidia inventory is IMHO a reasonable strategy

That is a very negative way to state facts. I doubt the neutrality of the authors.

Exactly.

"Banks allegedly engineered inflation by funding[1] consumer's spending"

[1] aka. credit cards

But that's exactly what happen in 2007-8 crisis.

but thats how banks actually create inflation under the limits of the regulators, isn’t it?

People don't have to be neutral. Neutrality between good and bad is mediocre. If you disagree with them make an argument, don't just lament the end of enlightened centrism.

enough fallacies here to drown Cicero. ad hominem circumstantial with a side of false equivalence

I'm not a financial guy but isn't circular financing just Nvidia loaning out it's chips to companies who then rent them and the pay Nvidia monthly for the chips until they are paid off? Lease to own or whatever they call it. I don't know why it's called circular financing. It's confusing like calling insurance "credit default swaps"

Was funding openAI a smart move which allowed Nvidia to capture the value being ingenerated downstream, or was it engineering scarcity?

My view is that it can be both. However the idea it was solely driven by a desire to engineer scarcity is absurd.

I worry the mindset which sees it in such stark terms would never have built CUDA at a gaming GPU company.

Jensen was a philanderer but also a visionary CEO and I don't think it's likely he would have seen temporarily boosting demand through bad loans as the right strategy.

Ed Zitron and others have been saying this for months

Context for those that have missed it: Zitron claims Microsoft bought 82 billion dollars of Nvidia GPUs now sitting in warehouses unused.

https://www.linkedin.com/posts/edzitron_joined-the-tech-repo...

hopefully prices come tumbling down, I need a decent GPU stuck with crap at the moment.

Given that is a sentiment I hear, and feel, a lot, it's unlikely the prices will come down much. It seems there is a lot of demand at lower prices.

Even if NVidia crashed and there ends up being an oversupply of GPUs or TSMC fab slots, this doesn't change that OpenAi and Google still need memory for their own hardware accelerators, so the price of boards wouldn't go down by much

Unfortunately these are server sku. I don't think you'd have good odds of getting a video signal out of them.

Crypto, then AI. Demand for GPU's has skyrocketted, and the number of foundries hasn't (much to the chagrin of every nation state).

Same. I replaced the pads and paste on my now ancient RX 580 in the hopes of surviving to the next time prices are affordable.

For anyone wanting to do so - you can! You have to make sure you nail the pad thickness though. That can be tough because it can have changed between revisions of the same card. Thankfully, AI is pretty good at combing through past data to figure out what you need. Also it voids your warranty.

Most here are missing something very important: since forever, corporates do all that is in their power (mostly legally or gray area, but sometimes even illegally) to make more money.

Nvidia is to blame? Maybe yes, maybe no. But who really need to be blamed is who is there to control! What is really broken is the control & accountability feedback loop.

So I was under the impression that Jensen had arranged early deals with every chip maker to lock in a good price for basically the next 10 years, but it meant that nVidia were obliged to purchase them.. So they the needed the scarcity and demand to be constantly growing or else they would still be on the hook for the chips coming over the next ~6/7 years regardless? I'll try find the article.

So this is just clearly their best strategy, right? And nothing about this is illegal btw

Well it's illegal when you're circumventing export controls in order to keep those numbers up yes. If that turns out to be what's happened of course.

Could is simply be that their indirekte sales to China went down, so they had to prop up demand elsewhere?

https://news.ycombinator.com/item?id=50424604

Which can work, but probably not indefinitely? If/when demand slows the prices on all of the hardware goes down, Nvidia's earnings fall and then the stock price.

"avalanche" of GPUs from TSMC, for which it would have no immediate buyers? That would be fine, if it led to lower chip prices. Of coure, it'd be just partial victory, as RAM is still in short supply. However, it doesn't seems like that will happen any time soon, because there is no other player in the market that can compete with them technologically.

The knives are out for Jensen Huang. The piling on of the articles by corporate media indicates Huang was purged. This is a systemic takedown.

This is the Western way of purging which we can contrast with Chinese way of purging when we remember Jack Ma.

It's interesting that Jack Ma's Alibaba was one of Megaspeed's backers.

https://finance.yahoo.com/markets/article/jensen-huang-scand...

I don't understand. You can't possibly make more money by buying from yourslef via proxies. Yes, that would raise prices but you could have just raised them yourself at will to the same effect. Is the article alleging a stock pumping scheme?

You raise prices on the back of scarcity that you quote your customers "sorry but because there are so few GPUs and your neighbour is paying double as much, that becomes the base price" - that the neighbour is actually getting a cut isn't mentioned, that scarcity is faked by investing in companies that buy GPUs (perhaps only on paper) isn't mentioned, and the fact that it's all just pure capitalism and how it is played is ignored.

Why are folks getting all excited? This is the game called capitalism that we all wanted and that we all know is the best ever system discovered to rule over others. Folks are getting annoyed because they didn't profit from it.

Just like Amazon becoming a loss leader in many markets off the back of AWS profits. They enter a random market, undercut the prices until the competition is removed and then they raise their prices. Rinse and repeat. All because they are making huge profits on AWS and can cross finance this strategy.

No one is complain about that. Because Amazon is on the good side of capitalism. Why Nvidia is now on the bad side of capitalism - who knows.

There is no concrete evidence of this.

Do you have any evidence of this? I pretty much just take it for granted that this has been happening.

Objectively: what better use is there for the extreme amount of excess cash they generate? I think this is an excellent strategy.

It’s not like they can invest in fabs or factories.

This framing is absolutely ridiculous. Nvidia is trying to diversify its customer base away from an oligopoly of hyperscalers and create demand for its product through vendor financing. Any scarcity is clearly incidental and a result of capacity constraints.

You can criticise it as a risky financial structure, but claiming bad faith is totally false in my opinion.

It is completely normal and expected for large companies to invest in others who can use and grow the use of their products. It’s equivalent to a microscope manufacturer investing in a microbiology company.

Here’s a quote about Henry Singleton, one of the most successful ever:

“CEOs need to do two things well to be successful, run their operations efficiently and deploy the cash generated by those operations.

Most CEOs focus on managing operations. Singleton, in contrast, gave most of his attention to the later task. As Warren Buffett observed, very few CEOs come prepared for this critical task of capital allocation.”

I guess we have to wait for China to target consumer market for gpu’s… maybe a decade ?

How has Nvidia funded those startups? Is funding somehowntied to the value of Nvidia? And how does that affect those startups now?

What happens to neoclouds when the bubble pops. nvidia stops circular financing, and all of a sudden they can’t pay their debt. This leads to the DCs getting bought cheaply by hyperscalers and you have a monopolistic AI market with google/fb/amazon and likes are running the show again.

I feel there's just enough value behind the crazy proposition that there won't really ever be a classic .com bubble pop. That's the thing: there actually is a lot of value in this tech. May some of the current big players crash and burn? Sure. But the tech is undeniably powerful - things will, and are, changing.

It's not about value, but return. Everyone likes to mention circular financing, which in of itself isn't an issue. If I have an amazing idea and NVDA wants to loan me money that's fine. My idea works out and we all end up billionaires.

The problem comes in if my idea doesn't end up generating a return. NVDA has not only sold me my GPUs, but it's also leveraged itself to my return. Repeat this across many businesses, none of which are generating returns yet. This is why when/if this unwinds it's going to be pretty catastrophic. As Charlie Munger said, "There are only three ways a smart person can go broke: liquor, ladies, and leverage".

> there actually is a lot of value in this tech

Unlike that weird technology "the web", the basis of the .com bubble. Turned out to have no value in it!

My brokerage account allows me to borrow money against my money. Actually, they encourage it.

… so the burst began with a spy

The article from WSJ that this article is based on tells a completely different story. That it was Jensen himself who was considering pulling out from supporting smaller players because the shortage was forcing bigger ones to look for alternatives to Nvidia.

The conclusion it was doing this to create artificial scarcity is made by the linked article, based on, well nothing. It might be correct, but it's not what the referenced article says.

Maybe a complicated question about markets ——

I feel like one of the central arguments against communism is that the central government is too big to successfully plan an economy, especially when it doesn’t have the distributed demand signals of a free market.

At what point does a private enterprise become so big and well capitalized it suffers the same problem. There are some notions here that Jensen is a genius for being able to orchestrate the demand for its products.

But I suspect we’re going to discover that this is vulnerable to the same problem.

When the largest revenue companies do about 10x in sales what they're doing now. Current US GDP is about $33T. Total domestic revenue of the top 10 US companies is about currently about $3.4T. There are around 36mil US companies. The bottom 90% bring in about $3.5T in total revenues. This roughly fits the expected pareto (power-law) distribution . So, a corporate oligopoly doesn't seem likely anytime soon.

But communism doesn’t work in smaller countries either. I don’t think you have to be as big as the US government to have enough money to engage in deals that obscure demand signal.

LLMs and GenAI in general could have been a useful technology that could have grown at a normal rate and been useful the whole time. Instead it was overhyped, stuffed into everything and most importantly over financed so much that it has become a bubble ready to burst and poised to bring a lot of pain to a lot of people.

As far as the billionaires are concerned, it all comes down to this: if they weren't crooks, they wouldn't be billionaires.

Taylor Swift?

Makes me think back to this!

"Nvidia has been one of the worst trouble spots we’ve had with hardware manufacturers. And that’s really sad because Nvidia tries to sell chips – a lot of chips – into the Android market. And Nvidia has been the single worst company we’ve ever dealt with! So Nvidia, fuck you!” —Linus Trovalds, June 2012

https://m.youtube.com/shorts/e0xE4YBrF5E

never buying nvidia ever again. even if amd is 2 times slower and 2 times more expensivee

The whole AI “GPU scarcity” thing has been a pretty obvious house of cards for a while now.

How do you mean?

CEOs today have unilateral control over the companies they are supposed to be employees of. They all act like unilateral owners.

Jensen was forcing nvidia customers to buy hardware they did not need to create artificial scarcity. This allowed nvidia to increase production. This enabled increasing the number of smuggled cards to china.

The winners are jensen's bank account and the businesses in china that wanted nvidia gpus.

I don't get how the CFO is running the company now, it was her job to know these things. She is the second most criminally liable person in the company.

The title doesn't make any sense. "[artificially] created demand" makes sense, "engineered scarcity" does not. You can 'engineer scarcity' by just shipping slowly. It's much cheaper as you don't have to 'throw away' units that will later get dumped on the market. This is the De Beers model.

Lucent did similar things in the late 90s / early 00’s. Helps make the bubble bigger. We all know how this is going to end.

There would be scarcity with or without these neoclouds, but I'd rather be in a universe where neoclouds exist than just the existing hyperscalers.

Source: https://www.wsj.com/tech/jensen-huang-colette-kress-nvidia-c...

403 - Access Denied Access denied

Status 403 Trace ID 0HNQ10T1IEVBA:000001B6

Surely this is Nvidia deploying excess capital by acquiring equity in high growth companies at significant discounts (factor in that a major portion of the investment comes back to them against their high margin products). This isn't a new business concept and is generally accepted as smart business? Not some breaking news conspiracy?

> (factor in that a major portion of the investment comes back to them against their high margin products)

One problem is that there isn't one number that indicates what percentage of Nvidia's equity investments come back to it in the form of chip purchases. In some cases, it appears it's 100%; in others, it has been suggested that every $1 invested produces >$3 in revenue. $1 invested for $1 in revenue versus $1 invested for $3 in revenue are really different outcomes.

There are also the questions of the revenue and revenue quality of the companies Nvidia has invested in, how much debt they've taken on, what sort of backstops/guarantees Nvidia has given them, etc.

> CFO and acting CEO, Colette Kress ... pushed for a reduction in circular financing agreements,

Reducing circular financing agreements seems like ... a good idea?

> in response to which Huang allegedly lay into Kress, calling her a "deer in the headlights,"

A WSJ article filtered through a gaming enthusiast website filtered through a general tech enthusiast website.

Here’s the original article: https://www.wsj.com/tech/jensen-huang-colette-kress-nvidia-c...?

I wonder how many shocking revelations we will receive from the current media circus. What is next, that NVidia was seeking profit?

According to our anonymous company sources, once during an office party, Jensen Huang went to the bathroom and did not flush.

What scares me is that anybody could believe this garbage. It costs me $1 to make, I sell it for $5. Good deal! In fact, such a fabulous deal, I'm going to do this: Make 2 for $2, sell one for $5, then loan these other dudes the $3 I made in profit plus go $2 in the whole for a total of $5 so that they can give me the $5 back.

The more often you do it, and the greater the margin becomes due to squeeze, the dumber it is.

The first time around you sold a GPU for $5 and took payment as 5 startup shares at $1 apiece. Now you go back for round 2 and the startup says their shares are trading at $5. Will you still loan them the money and exchange 1 GPU for one share at $5?

You get less and less of their company each time and you've already peaked because future funding rounds can't keep being valued higher.

The trick only works once but everyone thinks it's a perpetual motion machine.

What you see is liquidity demands outpacing the system's ability to supply, and this his how industry partners in the chain keep the cause spiraling upwards.

I thought we knew this already? Seems like some nice info is being redrummed up.

I imagine the shortsellers and put option holders like that.

I mean, preventing bubbles is literally the reason short sellers are allowed to exist. When they see a stock that is overpriced, they help it correct. Innocent people lost a lot of money on Enron.

Nvidia was so successful at engineering (presumably artificial) scarcity that the US imposed export restrictions on these chips even as trillion-dollar companies and entire nations are jockeying to get more of these chips, and people are getting arrested for smuggling them to places that shouldn’t have them, and GPU shipments worth millions are getting Fast-and-Furious’d en route, and their CEO allegedly got honey trapped by the Chinese government.

Maybe they’ve engineered a bit too much scarcity! ;-)

At this point, I am eagerly waiting for this AI song-and-dance to collapse so that I ( and my employer too) can purchase a decent specs system again.

I still do not see the prices coming down much as the demand for GPUs on the lower end is still pretty high.

Sorry, ramshanke - there really is a lot of promise to this tech. Will some of the current big payers collapse int he process? Definitely could happen. But there's no way around it: there's a lot of value in this new tech, and it's here to stay.

Lol the guy funds startups and suddenly that's a crime. If they didn't fund startups, they would be blamed for not supporting the ecosystem enough. What a farce.

Terrible reporting all around this situation, especially by NYT and WSJ. Then all the other news sources repeated the same nonsense.

- Singapore govt issued a statement clarifying that WSJ fabricated facts. [1]

- It's been clarified now by the President's Council of Advisors on Science and Technology that there is no convincing evidence that Alice Huang is a spy. [2]

[1] https://www.mha.gov.sg/media-room/newsroom/clarification-sta...

[2] https://x.com/DavidSacks/status/2121070881258504395

> This looks like a hit job on Jensen and Nvidia.

I honestly don't think this should be even a question at this point. This is systemic and organized. The pattern of the takedown is recognizable as well. That NYT and WSJ are teamed up is also informative.

I wonder: Is Jensen Huang the Jack Ma of the capitalist world?

https://www.ft.com/content/1fe0559f-de6d-490e-b312-abba0181d...

https://wallhop.io/https://www.ft.com/content/1fe0559f-de6d-...

They even tried to reinvent mining with Proof Of Work under AI sauce.

There is circumstantial evidence that, NVIDIA and Together AI are behind Pearl's "useful" PoW AI mining vaporware. https://news.ycombinator.com/item?id=48422809

commit 2 days ago, these clowns

https://github.com/pearl-research-labs/pearl

Zitron has been saying exactly this for a long time.

But its Zitron so we have to dismiss him immediately, right?

Well nobody expects a big shark to blissfully swim in the same tank of — among other — Larry Ellison, passively waiting to be chowed down.

The other cloud providers are building (copying) their own hw/sw stack so the least Nvidia would do is to standup its own cloud… indeed it’s what Jensen has been doing all along, the smuggling allegations are likely to be overblown.

Man, imagine if Kodak put out photography courses, or Black Diamond sponsored a climbing team lol.

I find it curious that you would consider those even remotely similar comparisons.

Would hate to see Fender giving artists sponsorphips.

Been saying for years that we’ll be seeing a wave of bargain-priced GPUs, memory and hard drives before long. Maybe they can turn these data centers into Amazon distribution centers or apartments.

What's funny is that I built a computer for my son exactly a year ago. I think we spent 550 Euros on a 5060Ti 16GB. Today the same exact card (half-length) is >1040 Euros: https://www.amazon.de/dp/B0FDQXHYFW

Every other component has also gone up in price, bigtime. Especially the SSD.

This is, I think, unprecedented. I'm old enough to remember when a 1-year-old computer was considered "old" and all computers would depreciate fast.

Prices sure have got a long way to fall before we're back in Nov 2025 territory...

I'd love to attend a rave at an abandoned data center.

Sorry to see you get downvotes, xvxvx, for an honest (but I feel very incorrect) take, but I understand their impetus: there is a lot of value and power in this crazy new tech. Some companies may bite it, but the cat is out of the bag - in some form or another, the new AI technology is powerful and it isn't going anywhere - and we are already seeing the significant value it provides.

If it's the case that for years you've been saying it's right around the corner, you've been wrong every time so far. That said, this time you still want credit for being right?

Broken clock theorem..

In what worlds would Nvidia not invest in adjacent startups? In what worlds would these startups not be encouraged/obligated to use their investors hardware?

A monopole does what monopoles do: keeping the prices high and the competition low.

NVidia enables people to buy their products. Oh the horror.

The middle finger that Linus had for Nvidia for 10-20 years ago, still ages well and true even to this day.

Nah, Jensens just a maximalistt

So the CEO 'laid into' the CFO but sounds like she didn't push back all that hard. Seems like something leaked by Kress to make her seem clean, but just makes her seem dirty and weak.

If this is truly a problem, it's her job to say no to the CEO. They need to clean house at the top and hire someone like Johny Srouji to right the ship.

Like all bubbles it comes to an end when people state the same thing we knew five years ago but suddenly have the clarity to understand why it is stupid. But only after the stock price goes down.

> we knew five years ago but suddenly have the clarity to understand why it is stupid

It is the same in all manias. Our critical thinking gets cooked when everyone around us is doing something silly.

Wouldn’t this be exactly what you do if you wanted to boost the stock as much as possible in the short term?

Seems like a great way to cash out at the top

so if this is true... we should finally get some gpus right?

After previous bubbles there was a lot of excess equipment to be purchased.

Of all the things silicon valley does, this is probably the least worrisome, despite it being somewhat indirect price manipulation. The word "allegedly" is doing a lot of work here.

If we can reduce some of the pressure off of RAM and GPU prices, that would be welcome.

It's become so common for RAM and semiconductor companies to collude to raise prices that we've become numb to it.

Regulators are asleep at the wheel in case you hadn't noticed

Its called kickbacks and bribes.

Not a new concept.

Deceptive article. That's no more "engineering scarcity" than a stock buyback or paying off debt.

You don't say!

Just wait until WSJ discovers the existence of a form called Intel Capital.

"there are no dark gpus"

This is such BS it's just insane.

Its big customers buy ~100x more GPUs and need even more.

Startups need not apply.

"Allegedly" hahahahahahahahahahahaaaaa aaaaahahahahahahahahahahaha

BigAI has also been artificially boosting demand for and perception of acceptance by paying for lots of shills in socmedia. astroturfing. I can even think of 3 multi-$MM rewards made in the space to pro-AI boosters (OpenClaw guy, Bun guy, Omarchy/DHH). arguably a 4th if count Linus too, via the Linux Foundation sponsorship

Well how else could OpenAI who is basically synonymous with AI to laymen have spent nearly $6B in 2025 on marketing? 7 out of 10 YT videos I watch are also sponsored by some random AI company, which to me is just insane: how does every AI startup have unlimited funds?

If true then I think it is time to put all responsible folks at NVIDIA in jail. This is collusion to the maximum, if it can be proven in court. I don't think they should be able to just pay a fine - there has to be mandatory jail time for people who build a cartel. Even in the USA a cartel should be forbidden - capitalism as the main religion in the USA, mandates that free market competition leads to lower prices. This clearly can not work if big corporations decide to milk the market. These things have increased insanely when the orange king and his cronies seized power.

What...really?

What a dumb take

This is delusional. The startups needed GPUs and nvda had the ones for AI. How is it even engineered they weren't forcing them to buy peanuts they didn't need but something they needed.

Is this “engineering scarcity” or just seeding demand for their product, which is something every company does?

As another example, when you apply to YC you can get some free AWS credits. Then if your startup is successful you’ll probably be deep into the AWS ecosystem.

If certain ec2 instance types are rare as they have been lately, is that AWS “engineering scarcity”? Or just finding new customers?

Guys, I have to say: I feel like I've found today's two-minute hate thread.

Has Nvidia done sketchy shit in the past (and very recent past)? Zero argument.

But as I follow this thread, I am seeing more and more pile-on that blames Nvidia for an increasingly staggering series of things that is starting to get out there.

I wonder if I’m noticing the odd timing of everything too much, or whether there’s an effort to air as much of Nvidia’s dirty laundry as possible.

No idea to what end, Nvidia stock collapsing would probably be enough to bring on the AI crash with no hope of gradual rebalancing (like the drop we saw a week ago) and most likely take the US economy with it.

It’s not like anyone will get cheap RAM suddenly if that happens, more like lots of people will lose their livelihoods.

When any trend, business, candidate, politician, etc. starts slipping, there is a tendency to pile on quickly. Not just “kicking when down”, but to unload so much other baggage quickly so it becomes just an undifferentiated “painful period” with no one (well perhaps one Judas goat, or actually Judas here) to blame, or to be held accountable for any individual business action. “Wow, that was a crazy time, we were all so silly. Let’s move on quickly.”

A product I work on had a big and quite public bug bounty payout recently. That led to an upswing in bug bounties reports. That's not odd timing, that's independent (human) agents sensing something as being valuable of their time poking at it.

I dunno, Nvidia's dirty laundry (dude's inability to keep his whatsit in his pants) seems like exactly the kind of thing that is inevitable to come out (oh god, that pun wasn't intentional).

No need for conspiracy here, personal weakness does in so many high flyers.

But I agree that the tech cat is out of the tech bag, and there's no going back: Nvidia doesn't make their own chips, they are almost fully reliant on other foundries.

Demand shows zero sign of softening - not since crypto, and AI just keeps it going.

Today, 5 of the busiest airports in US were ground to a halt for 5 hours. Why? the air traffic control system failed. Why did it fail? It is a system running 50 year old software. Why hasn't it been modernized? Because it is extremely expensive and risky to tinker with such a complex system.

I have no doubt that before the end of this decade, Claude could re-write the air traffic controller software, formally verify it, test it exhaustively, deploy it, and monitor it in operation. It might be able to do it now.

This is not a bubble. Very soon, it will be criminal negligence to run critical infrastructure on insecure, decades old software. Anthropics, or others like them, will be central to the functioning of the computer systems on which modern life relies.

So far the companies that did it had massive AI induced failures (Amazon just this year).

AI is absolutely a multiplier but people too eagerly try to dismiss existing good practices with "just let AI vibe code it for a week, surely it will be great"

It's delusional

And yet if you work deep with Opus5.5, it makes many mistakes all of the time. Of course, so do interns. The issue here is that peer reviewing by another instance of Opus5.5, is like having an identical human look at your own code. It's just not a true, real, peer review.

Now there are loads of fixes for that. But human peer review takes the super-fast out of using AI. You can review faster than write and test, that's for sure, but the best peer reviewing comes from people actually working in the code base, writing real code with their teammates.

Peer reviews by people not working on the code base, are far, far less viable. You'll catch big mistakes, but not mistakes predicated upon a code base you never ever touch or read in depth.

So you're left with lots of fixes we can suggest. I often use another model, eg, fable reviews once in a while on opus work, or I might use chatgpt for an alternative look. But here's the skinny...

Lots of devs do nothing of the sort.

And all current AI does seem to have similar blind spots.

I'm confident opus5.5 could easily re-write the entire codebase. Really, consider its age it cannot be that big of an existing code base. However, are there any devs alive working on that code base?

And do those devs work actively, or instead do they have fears about changing each and every byte? Do those devs understand the difference between 'that was a dumb way to write that' and 'oh, that's actually an oddity so that planes won't smash into each other in the sky'.

So:

* true human review isn't possible unless humans are working actively, and know the codebase

* few do any code review, even different model code review

* no one likely knows why design decisions were made in the software, so the biggest challenge is why was everything done precisely the way it was, which means the current biggest challenge is a series of ramp ups where the coders need to very much know ever aspect of traffic control in depth, then look at the codebase...

Because opus5.5 is good, but context windows aren't going to hold that.

I stand by this firmly, AI=awesome, no devs working alongside to have skill to review=insane.

Silicon Valley grifters, the whole industry is a Barnum Bailey freak show scam; Ed Zitron is 100% right.

Possibly Apple is the least sleezy, by defacto of being late to the SI scam party.

> Ed Zitron

He's been claiming what this article is claiming for months now. It's sad that most media outlets still pretend to not know who he is.

Apple was never really at the party giving OpenAI zero and giving Google a $1 billion refund on the default search engine position fee means that you’re not exactly at the party. But Apple did pay more for memory to put into your devices. But in the case of Apple, the end users paid for it.

The companies that don’t have billions of dollars but put billions of dollars into those data centers and paid the price in debt will be the ones that will be in trouble, particularly if they did nearly everything on credit, some of the companies spent a huge amount on CapEx. If the bubble were to burst now look out below.

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