Note that the Fed has a $6.7tn balance sheet [1]. (This is a silly comparison. But still fun.)
The real comparison: Nvidia's $500+ billion of investments and commitments [2] is substantially more than any easing the Fed has done in the same time [3]. Monetarily, Nvidia is creating a lot of money in our economy.
The good news: I have seen no evidence Nvidia has borrowed against its stock or otherwise linked its equity value to these commitments. Its stock could crash without causing–as long as its cash flows continue–a credit crisis through its investments and commitments.
“as long as it’s cash flow
continues” is doing a lot of optimistic heavy lifting. The whole premise of the circular financing worry is that Nvidia sits in the middle of all the guarantees made to companies like OpenAI. If any of those companies become insolvent, Nvidia is on the hook for it.
Also Nvidia isn’t really creating money. The 500B number is third party capital that already exists (BX, Apollo, etc).
Compute has already lost value for me. Six months ago I thought you needed a 1T+ model to be useful coding. Now I am able to get by just fine with a 27b model.
I see two factors converging to cause a collapse of this house of cards:
1. People are realizing that what they need isn't more general intelligence, it's more specialization. A small but well tuned coding model, a small but well tuned customer service model, a small but well tuned document explorer.
2. Specialized hardware - TPUs and NPUs - especially coming out of china. The latest GLM model was trained and runs on Huawei hardware. Nvidia is only worth so much because they are the biggest and best provider of the kind of compute needed to run llms, but the export bans mean china has a lot of incentive to topple that monopoly.
The amount of compute we need to do the things llms do is falling rapidly, the number of people who can provide that compute is rising.
OpenAI dropped sora because it was costing them ridiculous amounts of money and earning them very little. They determined that the market can't support the cost of generating video.
Without a material change in the market (more buyers, vastly cheaper generation), it's unlikely a different company could make that work. More buyers isn't likely to happen, so that leaves vastly cheaper generation - something that would cause nvidia's value to collapse if it happened.
If you reshuffle your argument, and apply the same facts you get to a similar conclusion but with a drastically different spin.
> it's more specialization
China, constrained by hardware, and talent (not to slight the Chinese, but they are limited to domestic resources - and much of the US effort is very international). They did, what the Chinese do, and optimized the process of production, and drastically lowered the cost of development of their models. Cheeper to build, cheaper to run is just good economics.
Meanwhile in the us, we have open AI doing "experiments" - it looks like the costs around the hugging face hack are going to be about the same as China would spend on building out one of their smaller efforts (several million dollars). (Depending on whos numbers you trust, the fact that I can even make this claim should make you raise an eyebrow).
Go back to the 80s' and "expert systems" - most people will tell you that for their time, they were amazing, and useful. People would have loved to have more of them but they were so cost prohibitive that we all but abandoned them for serious use. The US frontier labs seem to have forgotten this lesson and their calls to "slow down" look like an excuse to "cut the waste so we can move to making money".
> if OpenAI can’t use the compute, someone else can
This is the big point IMO since I have never given $1 to OpenAI but I subscribe to Vidu and Typecast, and have given money to Kling, Hailou, and even Gemini in the form of Google Workspace.
So these other guys have products and use cases, which OpenAI has never been able to crack beyond ChatGPT. And ChatGPT was never worth paying for, IMO.
If OpenAI dies, it's not because there is no market for the technology (which is all NVIDIA cares about), it's more that OpenAI doesn't know how to run a relevant technology company.
They were given everything, not just NVIDIA's billions of dollars and credit backing but all the first-mover advantage, all the respect and credibility early on, so it's really sad to see them unable to develop interesting products and turn a profit in a space they helped pioneer, while so many others are making money with the tech all around them.
NVIDIA is fine. The technology will continue to improve and NVIDIA will stay at the center. OpenAI is fucked - knew it when they retired Sora to focus on text-to-text and coding (a largely solved problem).
Do you use coding agents? Just curious bc from my experience using coding agents, open ai’s codex is neck and neck with anthropic’s claude code if not ahead. I wouldn’t agree that OpenAI hasn’t done anything since ChatGPT since codex is my daily driver for software engineering
It's kinda nuts to me how people can act like Claude is lightyears ahead of OpenAI models. Sure, it's one thing to simply have a preference or claim that Claude does some things better, but in reality they are both about as effective at doing the same job. I've long preferred GPT models because they know better how to shut up and don't seem to overthink as much as Claude, but I'm under no illusions that if OpenAI went belly-up then I couldn't do my job essentially the same with Claude. GPT models have also clearly improved over time in terms of programming. There haven't been any "big bangs" necessarily, but it's really not hard to give the same task to 5.3 and 6 and see which one has better output.
> how much did the fed sign up to backstop then? Surely it’s more than physical currency
The Fed doesn't backstop physical currency. That is issued by the Treasury (specifically, the Mint). The FDIC backstops bank deposits; the U.S. guarantees is obligations.
The Fed doesn't properly "backstop" anything. It's the lender of last resort–if you have a Treasury or other good collateral, it will loan you money against it. It's a financial regulator. And it regulates interest rates (i.e. the price of money) to influence inflation and employment.
The only backstops the Fed truly makes are to banks, by guaranteeing to always stand ready to lend against Treasuries and other good collateral.
That isn't a backstop, it's a direct obligation. It's also, like, not a real one? You can't redeem notes for specie. The term originates from when you could redeem dollars for metal. The Fed did play a role in backstopping that guarantee.
> know they don’t backstop jack squat but in practice there is a fed put
Sure. That isn't the same as a backstop. Backstops are hard–the Fed can't turn away an eligible borrower at the discount window. The Fed put is soft–the Fed will let market participants fail to send a message.
Going back to the top, it is incorrect to say the Fed backstops M2. This wouldn't be a footnote in a central-banking discussion, it would be something that would get called out as a screwup.
> How about what’s the amount from banks that the fed would willing lend as a last resort?
Infinity. The Fed mainly accepts Treasuries as collateral, but it can and has expanded the definition of good collateral in crises. There is no legal or frankly practical limit on how much money the Fed can create. Its only constraint is ultimately political. (Which is in turn mostly a function of inflation and employment and I guess now social media vibes.)
If you're looping this back to Nvidia, yes, I never claimed Nvidia has more lending capacity than the Fed. What I said was it's interesting that in practice, Nvidia appears to have created more money (if we're being pedantic, M3 which turns into M1) than the Fed has in that time. The Fed wasn't particularly trying to ease financial conditions in that time, so this is more of a curiosity tied to the title than a statement of capability.
The Fed can never default on any dollar-denominated debt. There is no similar currency that Nvidia can create ad infinitum.
That said, the number I think you're looking for in respect of the Fed is $30 to 40 trillion. It's about U.S. GDP. And it's also about U.S. bank and money-market assets plus the Fed's balance sheet. If every American bank failed, this could be the amount of money the Fed would have to create.
That said, Treasury running out and e.g. defending the euro-yen could easily increase that cross section in practice.
It would also follow that by increasing the money supply significantly they’re also contributing to inflation a great deal correct? (Given the rest of the economy is not growing at near the same rate as the AI industry)
Maybe a dumb question but how is NVIDIA increasing the total supply of money? Only the fed can actually order more money to be "created". Private companies can only work within the existing supply, that is, their reserves, no?
All debt is money. Anybody can create money, the trick is getting other people to accept it.
Nvidia is vendor financing its output.
An ai company order $100m of GPUs. Nvidia delivers and holds onto that debt as an asset - like a bank loan.
The production company uses AI to create better plant and purchases $100m of AI tokens to do so. The ai company hold that debt like a bank loan
Nvidia requests $100m of production based on its $100m of orders. The production company holds that debt like a bank loan.
You now have a monetary loop. Take a single $10 bank deposit and Nvidia pays the production company, who pays the ai company who pays Nvidia. Run that round the circle a few million times and everybody has been paid.
NV gives out a $100 to Party A, who puts it in their bank.
Bank takes $90 of that deposit (assuming 10% fractional reserve rule, no idea what the actual number is), and loans it out to party B, who pays it into either the same or another bank. Same rules apply -- except now it's down to $81 being loaned out, and so on and so forth, until that 100$ generated $1000 in total bank deposits.
edit: of course, it's never actually directly like this, a lot of other factors are involved, maybe the money is spent, maybe no one wants to borrow it, etc etc -- so it's more complicated but that's I think what they mean
Yup. Reserve requirements are functionally obsolete and never worked particularly well in the first place. Capital and liquidity requirements are far more robust and fine tuned.
That was my intuition at first too, but the original comment specified that they weren't borrowing all this money they're spending. The article also says how this is part of NVIDIA's strategy to enable demand, not create it, so supposedly these investments into their customers are actually going straight to paying for things.
Even if this money eventually gets loaned out eventually by one of NVIDIA's customers putting it into a bank, it isn't NVIDIA inflating the money supply, it's the borrowers, no? Or is this an ineffective way to look at things?
> There is no such thing as fractional reserve banking
Yes, there is. We just changed how we measure the fraction from a crude one like a reserve requirement (which takes zero account of asset quality or funding source) to finer and more-robust ones like capital and liquidity reqirements.
Banks still have to hold reserves. And those required reserves constrain their lending and thus the amount of money they can create. The limits just aren't the old-school reserve requirement.
Every form of lending that is specified via currency increases the supply.
If I give you GPUs worth $1bn, but take 100m payments for 11 years, then during that time you can use your other mony to buy other things that arent GPUs
If we stop after the 11 years and dont make new loans, the supply has shrunk back
If they’re effectively guaranteeing $500B in loans that adds close to $500B to M1, basically, that banks were not otherwise providing or loaning - at least that was my calculation.
Private banks increase money supply by lending. If 10 people deposit $1000 in a bank, it can loan $9000 to an 11th person. Now the economy has $19000 total.
> Private banks increase money supply by lending. If 10 people deposit $1000 in a bank, it can loan $9000 to an 11th person
It's the other way around. When a bank loans someone $1,000, they create a $1,000 deposit (their liability) and a $1,000 asset (their loan). Loans create deposits.
The Treasury can mint coin. But that's basically negligible in modern economies.
Ummm. No. I suggest you research how balance sheets work.
Unfortunately this kind of thinking is why so many people seem to think the big AI labs are totally killing it the second they make a “profit” on inference. Yes if you ignore the balance sheet all looks fine. Unfortunately companies go bankrupt because of their balance sheets, not operating profits and losses. You can make money on the direct COGS on every transaction and still be bankrupt.
You should research economics.
That $9000 can build a house that wouldn’t have existed otherwise. Then it gets paid back. $10000 in the bank and a $9000 house.
I learned about this concept in college macroeconomics. I asked this exact question and the TA said “yeah I guess repaying debt is like destroying money” as if they had never thought of that before. The idea of lending money increasing the money supply is definitionally true.
> when debt is wiped out through bankruptcy that inflation remains
Bankruptcy is deflationary. The same way credit creation makes money bankruptcy (and any other reduction of debt, including through repayment) destroys it. It's why financial crises were often followed by deflation in gold-based economies.
It's a simplification to help people understand, but this is in the spirit of how things work because the value in the economy is not the money, but the goods and services that get created in the economy as a consequence of it. Most constructive uses of financial instruments in the markets (stocks, bonds, mutual funds, etc) are about efficient reallocation of money to enable value creation while balancing different risks, and people who provide this money indirectly benefit from this value creation via interest, dividends, selling stock at a higher price, etc.
Now to expand GP's example (still simplified):
- A borrows $100k money to pay B toward building a house. B puts $100k in their bank.
- C borrows $90k from B's bank toward building a house to pay D. D puts $90k in their bank.
- etc
So, houses were created (or other services were provided), and that's the real multiplicative factor. If banks loan out 90% of the cash stored (i.e. keep 10% in reserve [1]), the multiplicative factor of value creation in the economy is 10x the original amount of cash deposited in the first bank.
Now, if all of us withdrew our savings at once or sold all our stocks at once, we would have an economic shock analogous to that which resulted the Great Depression. That's why for banks, we have FDIC insurance - to mitigate such a panic so that money can serve its value-multiplicative role when it's not being actively used for anything else by the person owning the money. That's also why a positive (but low) inflation was originally considered economically healthy - so that people put their money in banks/market rather than under their mattresses gradually losing value. When interest rates are low, that encourages people to put their money into riskier (non-FDIC-insured) investments with higher growth potential, like a balanced portfolio of stocks/bonds/etc to avoid losing value to inflation, resulting in more economic growth.
But at that point in time, there's 19k in money. And future repayments of that loan back to the bank are less valuable to it than that current value figure. Because a bank can do a lot more shenanigans with that loan figure than it can with just the deposits.
Banks create money when issuing a loan. This is how fractional reserve banking works. They lend money they don't have (most of). This is institutionalized fraud, and it's been standard operating procedure for centuries.
They aren’t; the parent comment is incorrect. It’s safer to say Nvidia is encouraging the money that already exists to be deployed on AI buildouts.
But everyone is now chasing the same opportunity (AI and its dependencies like hardware and power) that will drive prices higher in those sectors until supply responds (or demand disappears).
Regardless of NVIDIA and LLM/AI, the claim that inflation is caused directly, or without-fail, by an increase in money supply - is not well founded. A significant money supply increase may very well have a tiny or possibly even negative price-increasing impact - depending on how money is supplied, to which elements and under what conditions.
Key difference is that these loans, which do increase the money supply and create inflation, are on average productive and profitable and thus deflationary. Quantitative easing is just printing money and often goes towards repaying bad debts, which are unproductive and thus not deflationary, so the inflation (increase in money supply) does not outweigh the deflation (creating of goods)
Related but in specific ways. Stock is often priced in anticipation of growth. If NVDA could meet its credit obligations while its real profit stayed flat, the two would diverge, at least for awhile. A large amount of NVDA’s current cash flow is likely purchase contracts with a fixed multi-year term, which further smooths out the impact of, say, a stock crash following a couple of quarters of terrible earnings.
Now, whether many things NVDA has invested in with expectation of repayment or earnings would be able to repay or appreciate in a market environment where Nvidia’s stock was crashing? That’s another question entirely.
> that’s a pretty load-bearing as long as its cash flows continue. The two things are surely correlated
It's an important difference. In the GFC, the value of AAA-rated tranches fell. With the benefit of hindsight, we know they continued paying. They were directly leveraged, however, so mark-to-market losses caused firms to fail.
Nvidia stock crashing shouldn't have a similar effect to these commitments. If someone else has massively levered their Nvidia position, they'll obviously blow up. But Nvidia could survive a good deal of equity-market tumult in a way a bank could not.
"Uh, that’s a pretty load-bearing as long as its cash flows continue. The two things are surely correlated."
Ppl have made the prediction of it being a bubble or unsustainable since 2022. At this point, it's hard to say these people have credibility anymore. Ai is big enough, much like Google in 2005 or Facebook/Social Network in 2010 or apps in 2015, that it's an institution unto itself. It's not going to just crash as so many are expecting and have been wrong the past 4 years about.
Weird to think we are currently living in the ‘unlimited free Ubers because you recommended a friend or 2’ phase of this new technology.
Imagine if running fable costs you what it actually costs to run fable. A lot of vibe coders (and just proper software engineers) are gonna be very sad if that comes to pass.
>Nvidia’s financial engineering is partly a response to its biggest customers’ transformation into rivals. “Hyperscalers”, tech giants such as Amazon, Google, Meta and Microsoft, account for roughly half of Nvidia’s revenue
Companies just don't want to pay Jensen's tax. Hyperscalers might still pay Jensen's tax for LLM training but for inference. you don't have to. they are also betting on their own chip for training to replace Nvidia.
this is Nvidia panicking and doing vendor fiance to Neoclouds and buying Hugging Face. even none hyperscalers like Meta is betting on its own chip for AI inference.
I've always found it interesting when corporations start acting like public institutions. When traditionally philosophical, social contract ideas apply to things like corporate governance. Or like here, where private structures get powerful and important enough to resemble government structures.
The ideas we deal with when we discuss society and organization aren't exclusive to government, they relate to human nature in general. I wonder if in the future we will have more discussion of power and how to organize it in corporations, similar to what we discuss today about government.
Well the key difference making any superficial similarities fall apart is Nvidia does not have neutral economy-wide goals of maintaining small+stable inflation, near-full employment and stabilizing financial institutions like the Fed does. Nvidia is entirely self interested in protecting their own shareholder value (that includes the incestuous web of investments ultimately ending up spent on their GPUs).
The structure of the Fed is setup the way it is to limit the sort of self-serving, myopic political micromanaging that could be damaging to the economy at large. And, unlike a beneficiary of rapid growth like Nvidia, has (historically) tried to identify potential indicators warning of unsustainable bubbles that could lead to financial contagion and tries to mitigate that risk using the limited monetary tools available and their public soapbox.
A similar decision making structure would potentially be very undesirable to Nvidia shareholders as caution over long time horizons would likely produce what they would consider an excessively conservative, defensive strategy to avoid putting too much air into the bubble too quickly (at the expense of their valuation).
Corporations certainly don't have the same goals government does, but human nature applies universally.
I'm not saying that corporations should have exactly the same rules and structure as government does, but perhaps many of the ideas used to design governments can be borrowed.
In a country without religion, banner or ideology to unite the people in current-and-coming turbulent times, the bet is made on "unite under money, or have no money left"
the way to fight it is to be principled even in front of cheaper options - and to support others like you
Yeah its soooo interesting! Totally not dystopian, just soooo interesting and fascinating to ponder these scenarios in which corporations hold equal power to national governments!
Just such a curious scenario to let your mind wander about, how society would look like in these scenarios!
/s
I'm honestly so sick of the suspense of disbelief on this site, how is this more "interesting" to you, than the absolute sheer terror you should feel about going back to feudalism and serfdom? A typical western national state ensures that you have basic rights as a human being and aren't exploited to the death by non-government entities.
I'm not advocating for corporations to have equal power with governments, though. I think that's generally a terrible idea.
Looking at any organization with power and people involved, perhaps we can use the same ideas that traditionally apply to government in more places. That's all I'm saying.
This is not some mindless intellectual exercise to distract from how things are. In fact, as a proposal for how to reform corporate power, it's the opposite.
(Also, even though I think corporate power should be limited to a very specific arm of society, and that we shouldn't encourage more corporate power, you are greatly exaggerating. Feudalism and the abolition of human rights are not right around the corner.)
I wonder when they will give up on the gaming market because that could take down several publishers and developers. I really don't think it's an if question but a when because it almost feels like an afterthought at this point (they removed the standalone gaming revenue report from the financial reports this summer). Also I don't think AMD and Intel is capable "to step in" to replace them.
AMD would step in, they where behind nvidia but they've been closing that gap for a while and the 9070XT is the current value king (in this fucked up market) for mid-high gaming and you can actually buy them.
Demand for Nvidia cards has outstripped supply even on the mid-high cards specifically because they do better with local models than AMD cards with the same VRAM do broadly.
AI has completely broken the PC gaming market (and PC/Laptop market more broadly but gaming is really hit hard because it's the exact components that matter for both that overlap).
Nvidia had the mind share among gamers but so did Intel once, inertia only lasts so long they've been thoroughly intent on burning that to the ground for a while, back to the post 1080's
If RDNA5 is good (and 4 was it closed the gap on RT) they'll been in a solid place to take the spot if Nvidia do cede the ground.
I have a 7900XTX the last flagship card AMD did (about equal to a 9070XT for raster but 24GB VRAM not 16GB) and it has been and is a stellar card for gaming (let down only if you care about RT and the games I play don't have it).
Flawless under Linux, weaker on the AI behind nvidia but it runs Qwen surprisingly well and I didn't and don't care too much about that except to poke it occasionally.
> Also I don't think AMD and Intel is capable "to step in" to replace them.
It's kind of weird. nVidia kind of has the PC market cornered, but AMD has had the last couple of generations of Xbox and Playstation. Also, they power the Steam Deck/Machine, and Valve has been contributing a lot of AMD graphics features into the Linux drivers. There is a world where AMD (and maybe even Linux on AMD specifically) becomes the de facto standard for gaming.
Maybe this is silly of me, but maybe gaming would enjoy an era of hardware upgrades being rather unviable so the focus turns to optimization and aesthetic.
It will be interesting times but I don't think anyone will enjoy a plateau because it's expensive. Even replacing existing hardware is expensive now. Hardly enjoyabe.
A retraction from the gaming market wouldn't necessarily mean they'd still even produce the current crop of products. I could (and I would argue would) involve a complete shuttering of the GeForce brand, halting current production. On the assumption that Intel and AMD would follow, that wouldn't be an end of upgrades, but an end to the market.
Gaming is a larger market than Hollywood. Maybe it becomes a distraction for Nvidia, but someone will step in. That might actually be a good thing and why Nvidia wont do that: it creates an under served market in which newcomers can cut their teeth.
It’s not silly. games use far more hardware than they really need. It also pushes out release dates of aggressive console schedules like ps6 because even if it’s a massive upgrade and you have IP locked into your console, no one is going to pay $4000 to play a game like wolverine.
> I really don't think it's an if question but a when because it almost feels like an afterthought
I feel your reasoning is very weird. Are they losing money by selling consumer GPU? Just because the profit isn't that much compared to AI it doesn't mean that it's negative, and for-profit companies are not known for leaving money on the table. Apple doesn't reveal how much Apple TV+ makes for them either but I don't see it be gone anytime soon.
NVidia is limited by the number of chips they can produce.
If you can fab 1000 chips, and can sell some for $500 and some for $80000 what are you going to do?
The game GPU is at once profitable, but causes them to give up far more profits than they're gaining from it.
They're maintaining the game market to have multiple markets and not go all in, but it's strategic hedging at this point. When NVidia makes a gaming GPU instead of a data center GPU they are leaving money on the table in the short term since they're constrained at the fab level.
This almost seems like we need a strategic reserve for semiconductors- kinda like we have it for food, to prevent suppliers from throwing it away when they are suddenly able to sell something much more lucrative.
Nvidia is limited by the number of engineers they have. It might turn out that the AI market is so lucrative that it’s best to reallocate their gaming-focused engineers to AI.
Apple TV is at least a growth market for them, whereas gaming is sort of capped and clearly a tiny piece of nvidia’s revenue atm.
Which is distinctly different both in purpose and technology than the previous versions. DLSS 5 is no longer about frame improvements. It’s about increasing graphical fidelity with active AI rendering.
DLSS 5 is trying to relight and retexture the scene using AI. DLSS 4 is just trying to take a lower quality image and upscale it using AI
That seems a bit overzealous, most consoles[0] run on AMD chips today.
Both PS 5 and Xbox are based on AMD APUs and both serve the AAA market quite well. GTA 6, Assassin's Creed and CoD are probably good enough indicators that the performance is enough, even if there is always room for more (as PC ports show). The PC market will also probably be fine even if stagnation in perfomance gains has been creeping in for a few years now.
[0]: except Nintendo which relies on NVIDIA although their APU there focuses more on efficiency than top performance.
A Chinese company like CXMT will surely fill that unaddressed market the way CXMT is doing for memory. It would be rather unwise for nvidia to leave the door to the market open. AMD is positioned well to grow right now due to their non-Apple sillicon unified ram hardware coming soon.
Question: wouldn’t the fab be the actual bottleneck? In other words, why wouldn’t TSMC make more NVIDIA chips instead of AMD ones? I assume they’ll just do whichever is paying more, so if NVIDIA chips are better, gamers would be willing to pay more for them and in turn TSMC will be willing to make more of them?
It's still a 15B market for Nvidia, it's not nothing. But I'm curious how they're going to turn Rubin into a gaming GPU. I think at this point consumer GPU upgrades are going to be AI-related upgrades that happen to also help raster capabilities. Blackwell was already kind of a dud on performance uplift from Ada beyond the new LLM features.
Hermes still makes saddles that are somewhat reasonably priced compared to their handbags.
It's still profitable, it's their original raison d'etre, and there's no real reason for them to stop even if it its rounding error on their regular business.
Probably will never, ever see an Nvidia card with >32GB of VRAM though unless they start making dies that lack LLM performance like the gimped ethereum mining cards.
You must not be paying attention, they already have.
Intel is going nowhere but we all knew that anyways.
And again, you must not be paying attention, AMD is doing exactly what they said they would. No flagship for RDNA4 (just like RDNA2), RDNA5 flagship (10900 XT) coming right on schedule
I think they'll keep the gaming market alive for a while because renting gaming hardware from the cloud (GeForce NOW) is very congruous with AI keeping consumer hardware prices sky-high.
It continues modern trend of chow companies don't want consumers to truly own anything. Finance a car, pay a monthly subscription fee for heated seats, rent a phone, stream a movie, get rid of physical media, rent a GPU.
But if GeForce NOW doesn't take off, and they get convinced that the AI bubble will not pop, I could see them pulling a Micron and ending their consumer product lines.
> I really don't think it's an if question but a when
Nvidia still will ship gaming products. The upcoming RTX Spark laptop APUs are still gaming-capable - we also have Blackwell gaming GPUs and the Nvidia-powered Nintendo Switch 2.
People echoed this sentiment during the crypto mining crunch, and we still got gaming hardware designs after that blew over. One of CUDA's core value props is the consumer market, and Nvidia probably won't surrender it unless hardware becomes unreasonably scarce.
I don't think crypto is comparable. They barely made some dedicated crypto GPUs that market was always fickle due to ASCIs.
Look at the nvidia revenue breakdown chart, the AI boom looks quite different.
The GPU crunch came because cards like the 3060 were extremely cheap and could outrun most sub-$1000 ASICs at the time. The dedicated crypto GPUs were too-little too-late; hundreds of thousands of ordinary CUDA-capable GPUs had already been repurposed for mining by the time they launched.
> Also I don't think AMD and Intel is capable "to step in" to replace them
AMD has powered 2 generations each of Sony and Xbox consoles, Steam deck and shops a ton of GPUs especially if you count APUs. And then Intel literally ship more GPUs than Nvidia and AMD combined.
The gaming market doesn't need Nvidia. Especially as AAA is cratering.
They may allocate different number of resources every year based on market conditions but they'll never give up on gaming, that would be extremely silly.
Okay, but at some point these investments need to start turning profits; the financing NVDA has arranged is temporary, and private credit needs returns at some point. The overinvestment in AI will lead to a downturn in the capital cycle.
Realistically, they're worse than a central bank, because they can't exactly expand supply monotonically like a normal central bank. Nor do they realistically control rates.
The Japanese economy and yen carry trade is a close second.Rising oul prices and reduced output due to the conflicts in the Middle East could filter through to increasing yields on Japanese debt. In turn, the yen interventions have to continue to keep it lower than 160, which seems to be the psychological barrier for the yen carry trade.
and it doesn’t disappear [1], much like law of conservation
at any given time there is a finite amount of it most easily
observed in currencies’ relative price to another currency, and its movement between owners causes distortions in asset prices
most people I’m around and most trading indicator developers I’ve seen don’t seem to conceptualize the flow of value around the economy. so it feels niche and maybe visualizing this mental model can help many people
[1] central banks can functionally delete money in their bond purchase and roll off programs
I think we can go even further and say that IBM, Zeiss, several Japanese companies, and even the US Department of Energy are the actual foundation since ASML is largely just an integrator of many different technologies they license from elsewhere.
Imagine a scenario where the AI bubble bursts and AI companies and neoclouds go bankrupt en masse, and then a huge rebound occurs when AI has a delayed takeoff. Nvidia ends up with a massive amount of compute on its hands from its backstop deals, and it also owns assets from failed companies when profits start to grow. New startups running using Hugging take the place of OpenAI and Anthropic when their compute assets are divided between survivors like Nvidia, Microsoft, Alphabet, Meta.
If/when there is an AI crash, any number of small startups can buy compute for the price of electricity without anyone wanting to buy them. That is when the real innovation happens. The top of the hype cycle is usually more about getting rich quick and buying and shutting down competition.
While I dislike this take, when the dust settles we will have compute clusters orders of magnitude larger than anything that existed in 2023.
If demand vanishes for the 3 million cards Amazon just bought, then something will be done with them. The AI market may end up in a bizarre jepson's paradox of rotation between inference use cases and model training.
The OP I was replying to edited the comment, so I wasn't even considering that scenario. The original comment I replied to was about islamic banking comparison (up to the Wikipedia article link), dude added the scenario after my comment.
I find "bro" and "dudebro" to be such fascinating slurs. The previous incarnation was "neckbeard" / "obese dude living in mom's basement", so "dudebro" comes across almost like a compliment.
Note that the Fed has a $6.7tn balance sheet [1]. (This is a silly comparison. But still fun.)
The real comparison: Nvidia's $500+ billion of investments and commitments [2] is substantially more than any easing the Fed has done in the same time [3]. Monetarily, Nvidia is creating a lot of money in our economy.
The good news: I have seen no evidence Nvidia has borrowed against its stock or otherwise linked its equity value to these commitments. Its stock could crash without causing–as long as its cash flows continue–a credit crisis through its investments and commitments.
[1] https://www.federalreserve.gov/monetarypolicy/bst_recenttren...
[2] https://www.sec.gov/Archives/edgar/data/1045810/000104581026...
[3] https://www.federalreserve.gov/monetarypolicy/bst_recenttren...
Also Nvidia isn’t really creating money. The 500B number is third party capital that already exists (BX, Apollo, etc).
The reason Nvidia is comfortable making these deals is because if OpenAI can’t use the compute, someone else can.
Granted OpenAI going insolvent likely means a drop in the value of compute…
I see two factors converging to cause a collapse of this house of cards:
1. People are realizing that what they need isn't more general intelligence, it's more specialization. A small but well tuned coding model, a small but well tuned customer service model, a small but well tuned document explorer.
2. Specialized hardware - TPUs and NPUs - especially coming out of china. The latest GLM model was trained and runs on Huawei hardware. Nvidia is only worth so much because they are the biggest and best provider of the kind of compute needed to run llms, but the export bans mean china has a lot of incentive to topple that monopoly.
The amount of compute we need to do the things llms do is falling rapidly, the number of people who can provide that compute is rising.
Generative video requires significantly more computing power and energy than generative text.
OpenAI is fucked, compute is still needed, it's just them that isn't.
Without a material change in the market (more buyers, vastly cheaper generation), it's unlikely a different company could make that work. More buyers isn't likely to happen, so that leaves vastly cheaper generation - something that would cause nvidia's value to collapse if it happened.
> it's more specialization
China, constrained by hardware, and talent (not to slight the Chinese, but they are limited to domestic resources - and much of the US effort is very international). They did, what the Chinese do, and optimized the process of production, and drastically lowered the cost of development of their models. Cheeper to build, cheaper to run is just good economics.
Meanwhile in the us, we have open AI doing "experiments" - it looks like the costs around the hugging face hack are going to be about the same as China would spend on building out one of their smaller efforts (several million dollars). (Depending on whos numbers you trust, the fact that I can even make this claim should make you raise an eyebrow).
Go back to the 80s' and "expert systems" - most people will tell you that for their time, they were amazing, and useful. People would have loved to have more of them but they were so cost prohibitive that we all but abandoned them for serious use. The US frontier labs seem to have forgotten this lesson and their calls to "slow down" look like an excuse to "cut the waste so we can move to making money".
This is the big point IMO since I have never given $1 to OpenAI but I subscribe to Vidu and Typecast, and have given money to Kling, Hailou, and even Gemini in the form of Google Workspace.
So these other guys have products and use cases, which OpenAI has never been able to crack beyond ChatGPT. And ChatGPT was never worth paying for, IMO.
If OpenAI dies, it's not because there is no market for the technology (which is all NVIDIA cares about), it's more that OpenAI doesn't know how to run a relevant technology company.
They were given everything, not just NVIDIA's billions of dollars and credit backing but all the first-mover advantage, all the respect and credibility early on, so it's really sad to see them unable to develop interesting products and turn a profit in a space they helped pioneer, while so many others are making money with the tech all around them.
NVIDIA is fine. The technology will continue to improve and NVIDIA will stay at the center. OpenAI is fucked - knew it when they retired Sora to focus on text-to-text and coding (a largely solved problem).
They would have to go insolvent in a way that hits Nvidia revenue. Those are related by distinct factors, a difference that may matter in a crisis.
No, it's not. M2 includes things like traveler's cheques and money-market funds.
The Fed doesn't backstop physical currency. That is issued by the Treasury (specifically, the Mint). The FDIC backstops bank deposits; the U.S. guarantees is obligations.
The Fed doesn't properly "backstop" anything. It's the lender of last resort–if you have a Treasury or other good collateral, it will loan you money against it. It's a financial regulator. And it regulates interest rates (i.e. the price of money) to influence inflation and employment.
The only backstops the Fed truly makes are to banks, by guaranteeing to always stand ready to lend against Treasuries and other good collateral.
You are taking this too literally anyway. I know they don’t backstop jack squat but in practice there is a fed put.
Have a conversation with me, don’t be a pedant.
If you are saying they will lend last resort against treasuries you should know there are $40 trillion of those outstanding…
How about what’s the amount from banks that the fed would willing lend as a last resort?
That isn't a backstop, it's a direct obligation. It's also, like, not a real one? You can't redeem notes for specie. The term originates from when you could redeem dollars for metal. The Fed did play a role in backstopping that guarantee.
> know they don’t backstop jack squat but in practice there is a fed put
Sure. That isn't the same as a backstop. Backstops are hard–the Fed can't turn away an eligible borrower at the discount window. The Fed put is soft–the Fed will let market participants fail to send a message.
Going back to the top, it is incorrect to say the Fed backstops M2. This wouldn't be a footnote in a central-banking discussion, it would be something that would get called out as a screwup.
> How about what’s the amount from banks that the fed would willing lend as a last resort?
Infinity. The Fed mainly accepts Treasuries as collateral, but it can and has expanded the definition of good collateral in crises. There is no legal or frankly practical limit on how much money the Fed can create. Its only constraint is ultimately political. (Which is in turn mostly a function of inflation and employment and I guess now social media vibes.)
If you're looping this back to Nvidia, yes, I never claimed Nvidia has more lending capacity than the Fed. What I said was it's interesting that in practice, Nvidia appears to have created more money (if we're being pedantic, M3 which turns into M1) than the Fed has in that time. The Fed wasn't particularly trying to ease financial conditions in that time, so this is more of a curiosity tied to the title than a statement of capability.
The Fed can never default on any dollar-denominated debt. There is no similar currency that Nvidia can create ad infinitum.
That said, the number I think you're looking for in respect of the Fed is $30 to 40 trillion. It's about U.S. GDP. And it's also about U.S. bank and money-market assets plus the Fed's balance sheet. If every American bank failed, this could be the amount of money the Fed would have to create.
That said, Treasury running out and e.g. defending the euro-yen could easily increase that cross section in practice.
Nvidia is vendor financing its output.
An ai company order $100m of GPUs. Nvidia delivers and holds onto that debt as an asset - like a bank loan.
The production company uses AI to create better plant and purchases $100m of AI tokens to do so. The ai company hold that debt like a bank loan
Nvidia requests $100m of production based on its $100m of orders. The production company holds that debt like a bank loan.
You now have a monetary loop. Take a single $10 bank deposit and Nvidia pays the production company, who pays the ai company who pays Nvidia. Run that round the circle a few million times and everybody has been paid.
Rinse and repeat.
Bank takes $90 of that deposit (assuming 10% fractional reserve rule, no idea what the actual number is), and loans it out to party B, who pays it into either the same or another bank. Same rules apply -- except now it's down to $81 being loaned out, and so on and so forth, until that 100$ generated $1000 in total bank deposits.
edit: of course, it's never actually directly like this, a lot of other factors are involved, maybe the money is spent, maybe no one wants to borrow it, etc etc -- so it's more complicated but that's I think what they mean
Even if this money eventually gets loaned out eventually by one of NVIDIA's customers putting it into a bank, it isn't NVIDIA inflating the money supply, it's the borrowers, no? Or is this an ineffective way to look at things?
Quite why this persists when the Bank of England debunked it in 2014 [0] is anybody’s guess.
Just another of those concepts that is neat, plausible and wrong.
[0]: https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m...
Yes, there is. We just changed how we measure the fraction from a crude one like a reserve requirement (which takes zero account of asset quality or funding source) to finer and more-robust ones like capital and liquidity reqirements.
Banks still have to hold reserves. And those required reserves constrain their lending and thus the amount of money they can create. The limits just aren't the old-school reserve requirement.
No. Most money in modern economies is created by private parties [1].
[1] https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
If I give you GPUs worth $1bn, but take 100m payments for 11 years, then during that time you can use your other mony to buy other things that arent GPUs
If we stop after the 11 years and dont make new loans, the supply has shrunk back
It's the other way around. When a bank loans someone $1,000, they create a $1,000 deposit (their liability) and a $1,000 asset (their loan). Loans create deposits.
The Treasury can mint coin. But that's basically negligible in modern economies.
Unfortunately this kind of thinking is why so many people seem to think the big AI labs are totally killing it the second they make a “profit” on inference. Yes if you ignore the balance sheet all looks fine. Unfortunately companies go bankrupt because of their balance sheets, not operating profits and losses. You can make money on the direct COGS on every transaction and still be bankrupt.
They shouldn't have been a TA. Modern money is destroyed in three ways: through taxation, defaults and the extinguishing of debts.
Bankruptcy is deflationary. The same way credit creation makes money bankruptcy (and any other reduction of debt, including through repayment) destroys it. It's why financial crises were often followed by deflation in gold-based economies.
Now to expand GP's example (still simplified):
- A borrows $100k money to pay B toward building a house. B puts $100k in their bank.
- C borrows $90k from B's bank toward building a house to pay D. D puts $90k in their bank.
- etc
So, houses were created (or other services were provided), and that's the real multiplicative factor. If banks loan out 90% of the cash stored (i.e. keep 10% in reserve [1]), the multiplicative factor of value creation in the economy is 10x the original amount of cash deposited in the first bank.
Now, if all of us withdrew our savings at once or sold all our stocks at once, we would have an economic shock analogous to that which resulted the Great Depression. That's why for banks, we have FDIC insurance - to mitigate such a panic so that money can serve its value-multiplicative role when it's not being actively used for anything else by the person owning the money. That's also why a positive (but low) inflation was originally considered economically healthy - so that people put their money in banks/market rather than under their mattresses gradually losing value. When interest rates are low, that encourages people to put their money into riskier (non-FDIC-insured) investments with higher growth potential, like a balanced portfolio of stocks/bonds/etc to avoid losing value to inflation, resulting in more economic growth.
[1]: https://en.wikipedia.org/wiki/Fractional-reserve_banking
Which is, you know, the entire risk that people are worried about.
It’s been zero in the UK for hundreds of years.
But everyone is now chasing the same opportunity (AI and its dependencies like hardware and power) that will drive prices higher in those sectors until supply responds (or demand disappears).
Uh, that’s a pretty load-bearing as long as its cash flows continue. The two things are surely correlated.
Now, whether many things NVDA has invested in with expectation of repayment or earnings would be able to repay or appreciate in a market environment where Nvidia’s stock was crashing? That’s another question entirely.
It's an important difference. In the GFC, the value of AAA-rated tranches fell. With the benefit of hindsight, we know they continued paying. They were directly leveraged, however, so mark-to-market losses caused firms to fail.
Nvidia stock crashing shouldn't have a similar effect to these commitments. If someone else has massively levered their Nvidia position, they'll obviously blow up. But Nvidia could survive a good deal of equity-market tumult in a way a bank could not.
I'm worried I'm going to start picking up claudisms, and then accused of being AI.
Ppl have made the prediction of it being a bubble or unsustainable since 2022. At this point, it's hard to say these people have credibility anymore. Ai is big enough, much like Google in 2005 or Facebook/Social Network in 2010 or apps in 2015, that it's an institution unto itself. It's not going to just crash as so many are expecting and have been wrong the past 4 years about.
Imagine if running fable costs you what it actually costs to run fable. A lot of vibe coders (and just proper software engineers) are gonna be very sad if that comes to pass.
If these cards burn out in less than the ~5 years of depreciation that accounting puts them at, well then there will be problems.
Companies just don't want to pay Jensen's tax. Hyperscalers might still pay Jensen's tax for LLM training but for inference. you don't have to. they are also betting on their own chip for training to replace Nvidia.
this is Nvidia panicking and doing vendor fiance to Neoclouds and buying Hugging Face. even none hyperscalers like Meta is betting on its own chip for AI inference.
The ideas we deal with when we discuss society and organization aren't exclusive to government, they relate to human nature in general. I wonder if in the future we will have more discussion of power and how to organize it in corporations, similar to what we discuss today about government.
The structure of the Fed is setup the way it is to limit the sort of self-serving, myopic political micromanaging that could be damaging to the economy at large. And, unlike a beneficiary of rapid growth like Nvidia, has (historically) tried to identify potential indicators warning of unsustainable bubbles that could lead to financial contagion and tries to mitigate that risk using the limited monetary tools available and their public soapbox.
A similar decision making structure would potentially be very undesirable to Nvidia shareholders as caution over long time horizons would likely produce what they would consider an excessively conservative, defensive strategy to avoid putting too much air into the bubble too quickly (at the expense of their valuation).
I'm not saying that corporations should have exactly the same rules and structure as government does, but perhaps many of the ideas used to design governments can be borrowed.
In a country without religion, banner or ideology to unite the people in current-and-coming turbulent times, the bet is made on "unite under money, or have no money left"
the way to fight it is to be principled even in front of cheaper options - and to support others like you
Just such a curious scenario to let your mind wander about, how society would look like in these scenarios!
/s
I'm honestly so sick of the suspense of disbelief on this site, how is this more "interesting" to you, than the absolute sheer terror you should feel about going back to feudalism and serfdom? A typical western national state ensures that you have basic rights as a human being and aren't exploited to the death by non-government entities.
Looking at any organization with power and people involved, perhaps we can use the same ideas that traditionally apply to government in more places. That's all I'm saying.
This is not some mindless intellectual exercise to distract from how things are. In fact, as a proposal for how to reform corporate power, it's the opposite.
(Also, even though I think corporate power should be limited to a very specific arm of society, and that we shouldn't encourage more corporate power, you are greatly exaggerating. Feudalism and the abolition of human rights are not right around the corner.)
Demand for Nvidia cards has outstripped supply even on the mid-high cards specifically because they do better with local models than AMD cards with the same VRAM do broadly.
AI has completely broken the PC gaming market (and PC/Laptop market more broadly but gaming is really hit hard because it's the exact components that matter for both that overlap).
Nvidia had the mind share among gamers but so did Intel once, inertia only lasts so long they've been thoroughly intent on burning that to the ground for a while, back to the post 1080's
If RDNA5 is good (and 4 was it closed the gap on RT) they'll been in a solid place to take the spot if Nvidia do cede the ground.
I have a 7900XTX the last flagship card AMD did (about equal to a 9070XT for raster but 24GB VRAM not 16GB) and it has been and is a stellar card for gaming (let down only if you care about RT and the games I play don't have it).
Flawless under Linux, weaker on the AI behind nvidia but it runs Qwen surprisingly well and I didn't and don't care too much about that except to poke it occasionally.
It's kind of weird. nVidia kind of has the PC market cornered, but AMD has had the last couple of generations of Xbox and Playstation. Also, they power the Steam Deck/Machine, and Valve has been contributing a lot of AMD graphics features into the Linux drivers. There is a world where AMD (and maybe even Linux on AMD specifically) becomes the de facto standard for gaming.
Edit: about half in fact! The rest is shared between the other traditional gaming types.
> I really don't think it's an if question but a when because it almost feels like an afterthought
I feel your reasoning is very weird. Are they losing money by selling consumer GPU? Just because the profit isn't that much compared to AI it doesn't mean that it's negative, and for-profit companies are not known for leaving money on the table. Apple doesn't reveal how much Apple TV+ makes for them either but I don't see it be gone anytime soon.
If you can fab 1000 chips, and can sell some for $500 and some for $80000 what are you going to do?
The game GPU is at once profitable, but causes them to give up far more profits than they're gaining from it.
They're maintaining the game market to have multiple markets and not go all in, but it's strategic hedging at this point. When NVidia makes a gaming GPU instead of a data center GPU they are leaving money on the table in the short term since they're constrained at the fab level.
Apple TV is at least a growth market for them, whereas gaming is sort of capped and clearly a tiny piece of nvidia’s revenue atm.
DLSS 5 is trying to relight and retexture the scene using AI. DLSS 4 is just trying to take a lower quality image and upscale it using AI
Both PS 5 and Xbox are based on AMD APUs and both serve the AAA market quite well. GTA 6, Assassin's Creed and CoD are probably good enough indicators that the performance is enough, even if there is always room for more (as PC ports show). The PC market will also probably be fine even if stagnation in perfomance gains has been creeping in for a few years now.
[0]: except Nintendo which relies on NVIDIA although their APU there focuses more on efficiency than top performance.
And it’s maybe 5-10% of their revenue at lower profit margins.
Consumer cards just don’t matter very much to nVidia anymore.
In 2020 it was half of their revenue.
It's still profitable, it's their original raison d'etre, and there's no real reason for them to stop even if it its rounding error on their regular business.
Probably will never, ever see an Nvidia card with >32GB of VRAM though unless they start making dies that lack LLM performance like the gimped ethereum mining cards.
Intel is going nowhere but we all knew that anyways.
And again, you must not be paying attention, AMD is doing exactly what they said they would. No flagship for RDNA4 (just like RDNA2), RDNA5 flagship (10900 XT) coming right on schedule
It continues modern trend of chow companies don't want consumers to truly own anything. Finance a car, pay a monthly subscription fee for heated seats, rent a phone, stream a movie, get rid of physical media, rent a GPU.
But if GeForce NOW doesn't take off, and they get convinced that the AI bubble will not pop, I could see them pulling a Micron and ending their consumer product lines.
Nvidia still will ship gaming products. The upcoming RTX Spark laptop APUs are still gaming-capable - we also have Blackwell gaming GPUs and the Nvidia-powered Nintendo Switch 2.
People echoed this sentiment during the crypto mining crunch, and we still got gaming hardware designs after that blew over. One of CUDA's core value props is the consumer market, and Nvidia probably won't surrender it unless hardware becomes unreasonably scarce.
https://ourworldindata.org/data-insights/nvidias-revenue-fro...
The GPU crunch came because cards like the 3060 were extremely cheap and could outrun most sub-$1000 ASICs at the time. The dedicated crypto GPUs were too-little too-late; hundreds of thousands of ordinary CUDA-capable GPUs had already been repurposed for mining by the time they launched.
AMD has powered 2 generations each of Sony and Xbox consoles, Steam deck and shops a ton of GPUs especially if you count APUs. And then Intel literally ship more GPUs than Nvidia and AMD combined.
The gaming market doesn't need Nvidia. Especially as AAA is cratering.
Sadly it seems like some haven’t watched the end of the last movie on this subject.
Funding companies under the condition that they use their infra.
Also called: Buying customers.
I thought a central bank would be like: China is the world's largest official creditor and holds the highest foreign exchange reserves.
That's what makes you a naturally forming central bank.
Realistically, they're worse than a central bank, because they can't exactly expand supply monotonically like a normal central bank. Nor do they realistically control rates.
Everything influences each other with varying gravitational pull
At one point the mental model was more like a web, but spacetime with mass matches the model more closely
at any given time there is a finite amount of it most easily observed in currencies’ relative price to another currency, and its movement between owners causes distortions in asset prices
most people I’m around and most trading indicator developers I’ve seen don’t seem to conceptualize the flow of value around the economy. so it feels niche and maybe visualizing this mental model can help many people
[1] central banks can functionally delete money in their bond purchase and roll off programs
The mint?
The material cement that allows chips to exist above it.
And the platform is made of time: ours.
https://en.wikipedia.org/wiki/Islamic_banking_and_finance
Imagine a scenario where the AI bubble bursts and AI companies and neoclouds go bankrupt en masse, and then a huge rebound occurs when AI has a delayed takeoff. Nvidia ends up with a massive amount of compute on its hands from its backstop deals, and it also owns assets from failed companies when profits start to grow. New startups running using Hugging take the place of OpenAI and Anthropic when their compute assets are divided between survivors like Nvidia, Microsoft, Alphabet, Meta.
If/when there is an AI crash, any number of small startups can buy compute for the price of electricity without anyone wanting to buy them. That is when the real innovation happens. The top of the hype cycle is usually more about getting rich quick and buying and shutting down competition.
Nvidia booked $496 million in interest income in Q2 alone [1].
[1] https://www.sec.gov/Archives/edgar/data/1045810/000104581026... page 15
If demand vanishes for the 3 million cards Amazon just bought, then something will be done with them. The AI market may end up in a bizarre jepson's paradox of rotation between inference use cases and model training.
Let’s look to the past:
https://www.history.com/articles/1929-stock-market-crash-war...
Maybe THAT'S the real recession indicator.