That’s such an Enron thing to say.
I bet Enron also claimed it wasn’t Enron.
The irony that nVidia just shifted the narrative from “not enough chips” to “not enough energy” is insane.
You can do everything right and still have the curse of investor overconfidence placed on you.
Huang has been complaining for some time that doing well doesn’t result in stock gains, but the actual problem is the stock price is way too high so doing well does nothing for investor expectations.
This is when you sell shares because they no longer have any upside potential.
It sucks for companies though, but the fact is nvidia is overvalued at a 4.5T market cap.
In some ways the victim of their own success, that’s just the way this system is built, for better or worse (mostly worse). The incentives drive the behaviour, but the architecture is hostile in nature, so it’s hard to have different outcomes at a certain level. Infinite growth is literal cancer.
“We didn’t want to inflate our valuation with circular investings, the market made us do it! We are the victims here!!”
*Deploys golden parachute*
he will soon have to deploy one made of AI chips
he’s got nothing to worry about. when they crash down to $1, trump will call it a “matter of national security” or some shit, and then bail them out, courtesy of your tax dollars and my tax dollars. because they actually want the AIs for their police state surveillance
The company doesn’t care if the stock price hits $1. If the company is paying it’s bills, it just continues. It’s the people who hold shares that care. The company doesn’t hold shares in itself.
Enron collapsed because the company financials collapsed, not because the stock price collapsed. That happened after all the bad accounting practises and hidden debt came to light. Now, in that case the shareholders succeeded in suing for their losses, but they only had a case because of the mismanagement.
The company absolutely does own shares of itself and it’s ability to secure credit and just engage in business in general depends of the value of that holding.
No. The board can decide to issue more shares, but this is a sub-dividing of the already issued shares and so normally requires a vote from the shareholders. Major shareholders normally sit on the board, so the two groups overlap but are legally distinct.
If a company buys it own shares, it’s normally a “buyback” and the shares cease to exist.
It does impact employee morale when they get paid with stock incentives and they go to zero.
Of course. They are shareholders.
The company is a separate legal entity though.
You can’t really bail out a stock price though…
I guess you could provide a guaranteed backstop to sellers and funnel the stock to the government, as Trump seems to love doing, but then you end up with a $3T of over-valued assets that you can’t do anything with.
Nvidia definitely isn’t Enron. It’s all of Nvidia’s customers that are mini-Enrons.
Enron crashed because they were cooking their books and faking income, declaring potential profit where none existed.
That’s not Nvidia. Nvidia is selling actual product as fast as they can make it at whatever price they want to charge.
Nvidia’s customers, on the other hand, are the ones who have to justify buying billions of dollars of product from Nvidia and explaining how they plan to make a profit from that.
Enron crashed because they were cooking their books and faking income, declaring potential profit where none existed
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Sell chips to X
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Receive stock in X
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Value of stocks = discounted sum of future (fake) income
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Booked as an asset on the balance sheet
This is exactly like Enron but the underlying commodity isn’t energy, it’s compute.
Nvidia sells plenty of GPUs for actual money, they are good for it.
No, the real issue is the depreciation for the people owning GPUs. Your GPU will be usable for 4-6 years, and 2-4 of those years will be spent as ”the cheap old GPU. After that time, you need new GPUs. (And as the models are larger by then, you need moahr GPU)
How the actual fuck do these people expect to get any ROI on that scale with those timeframes? With training, maybe the trained model can be an asset (lol), but for inference there are basically no residual benefits.
I’m still rocking a GTX970 from 2014
Do this:
- Calculate the total power cost of running it at 100% load since 2014
- Calculate Flops/Watt and compare with modern hardware
- Calculate MTTF when running at 100% load. Remember that commercial support agreements are 4-5 years for a GPU, and if it dies after that, it stays dead.
- In AI, consider the full failure domain (1 broken GPU = 7+ GPUs out of commission) for the above calculation.
You’ll probably end up with 4-6 years as the usable lifetime of your billion dollar investment. This entire industry is insane. (GTX 1080 here. Was considering an upgrade until the RAM prices hit.)
That’s Michael Burrys thesis. Higher depreciation for GPU owners is a positive for Nvidia because they end up buying more GPUs.
I’m highlighting the the future revenue of those customers that Nvidia has booked in terms of equity. That is equivalent to Enron. Here the SPVs are named companies like OpenAI and other model developers.
I feel like what sounds personally insane to us (and is, don’t get the wrong idea), to the people making such decisions the situation is more like -
“Emerging market with unknown upside thanks to new and evolving capabilities, exploration and competitive advantage shaped and constrained, globally, by hardware capability. Not my money I’m betting, ‘risk’ is extreme opportunity for me, negative consequences borne by others. Let’s go”
And the companies faking revenue instead of profit.
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NVIDIA is producing and delivering GPUs. However this does NOT translate into income, and that’s what’s making it shady. These companies are paying in shares that will be worth nothing when it pops.
It depends on the customer. Microsoft, Google, Amazon all have the revenue to carry the debts they are taking on. Oracle, Chat GPT, Musk and others are waay more sketchy.
The build out is going to take billions of dollars and these companies aren’t going to see a return for at least 5 years or more. The majors can carry that kind of debt load long term even if AI doesn’t pan out. Other businesses will struggle or go under if AI doesn’t bring the returns.
The next major movers will be companies that do a lot of IT business consulting like IBM. They are going to be busy helping non IT focused firms incorporate AI into their business model.
Finally if all these data centers pan out and the US keeps oscillating between shunning Renewables or Fossil fuels every time a new party comes to office we are going to have major problems with our energy infrastructure. Think energy bills as high as your mortgage within the next 5 years. Invest in utilities or energy companies and try to put solar and some kind of storage on your home.
It’s all of Nvidia’s customers that are mini-Enrons.
I don’t think that those are faking profit. Well, I don’t have some comprehensive list, and maybe somewhere someone is, but not for the majority of purchases. It’s possible that they won’t wind up being long-term profitable, but there isn’t fraud involved in that.
I don’t think that the Enron analogy is very applicable in general. Like, what people who are critical of the extent of AI investment are worried about is analogous to the dot-com bubble, where the returns to investors from companies didn’t warrant the level of investment and stock prices for many companies shot way up and then fell back down.
EDIT: It’s fair to say that Nvidia is driving demand for its products. But…that may be quite sensible, since if you have a killer app or two explode, it can drive massive demand for the hardware that runs it. If you have capital available and control the best hardware out there, it may well make more sense to use that capital on building more demand for your product than to go and try and improve the product more. There’s only so many chip engineers available that Nvidia can hire, and unless they want to get into the “writing AI software” game themselves, which would have them compete with their customers, I’d think that that’s potentially a reasonable place to put their capital if they’re trying to improve their business potential.
Nvidia sold a lot of hardware when cryptocurrency became popular. I think that it’s probably fairly safe to say that AI applications have considerably more potential to provide utility than does cryptocurrency.
OPENAI is probably the one that will be set to lose the most, and then oracle? i dont know if palintir fits into this, but THEIls company have been desperately trying to peddle his services to multiple countries already.
Enron was cooking the books hiding huge deficits, and spending the money from the workers pension funds, so no Nvidia isn’t Enron, but that doesn’t mean it’s all good.
Enron was the absolute worst, only matched by the Bernie Madoff pyramid scheme and the Bankman Fried crypto fraud.Saying you are better than that is a very bad look.
Joke aside, that’s kind of the vibe it gives off.
You can’t steal from employee pensions if you don’t offer a pension
Especially since they made the comparison on their own! Relevant article: https://www.wheresyoured.at/nvidia-isnt-enron-so-what-is-it/
If a company says they are not like Enron, it means they 1000% are exactly like Enron
Yeah. Enron’s scheme was trading money back and forth with itself to inflate its value until it all came crashing down, tanking Enron.
Nvidia is at the center of a scheme involving the entire economy trading money back and forth between a few companies to inflate value, so when the scheme tanks it’ll crush everybody.
Big tech is just trading the same $100b between each other to generate infinite shareholder value.
Man that reminds me of an old comic where two guys give each other the same $50,000 back and forth to eat horse shit and in the end their like, “we just created two jobs and grew GDP by $100,000!” Lol
In Russia it’s an anecdote about two cowboys with one saying in the end “Bill, I think we’ve both just eaten shit for free”.
hot potatoes, but they do need someone to hold on to that 100bn debt, usually other industries outside the tech sector. thats why they peddle it so hard to trump, to be used with palintir, and then other services.
Remember that when the news article talks about the economy, it’s mostly talking about rich people’s yachts.
Obviously there are some people nearing retirement age who need their pension plans not to lose value rapidly, they do exist. But the vast majority of the money that is being discussed here, that a bubble might make or break, is millionaires and billionaires savings accounts… So when this bubble bursts and when these companies go bankrupt, to hell with the ultra rich. If we want to help out people who are struggling to live out their retirement because of the stock market collapse that will occur, let’s do that, and let’s just tell the billionaires to go to hell.
A second order Enron you say?
They are going to do a lot more damage then Enron when their bubble pops.
EDIT: LOL, found the techbro.
What if it’s not a bubble?
So I tried using some AI chatbots to find a movie recently, it made up a few, none being the answer.
(The question was about a historical movie, made in perhaps 1970s by the feeling, set someplace in southern France somewhere around 1650s, has a few beautiful views of nature and castles ; one scene where a guard captain enters a room, asks a question, as a power gesture drinks a glass of wine on the table and a minute later falls ; another scene where for whatever reason a rapier fight happens in something like a tavern, two women in pastel dresses are descending by an open ladder from the second floor, seeing the brawl take our pocket pistols, one of them is stabbed with a rapier ; another scene where a guy is getting questioned with his feet over the fire ; another when another guy is climbing a tower clinging at brick mortars outside and hears guards’ boots on the ladder very loudly ; when I was a kid and saw that, someone said it’s an adaptation of something by Lope de Vega, but I’m not sure that’s correct ; that’s just in case someone reading this knows such a movie.)
But some googling sessions they do optimize, without you the user ever having to browse a webpage, and just getting a textual answer. That’s a valid use.
And some other processes. They don’t have to be useful for all things they are applied to, just some profitable.
Being a bubble does not mean the service they provide is useless. It means that the service is never generating enough profit to repay for the huge cost of providing it.
Would you pay 500 dollars a month to have the possibility to do your movie searches? Or alternatively, would you like your LLM of choice to counter that, having read all your emails and browser history, you are probably interested in a totally different movie that just happens to be playing now at a nearby cinema?
Because these AI companies are currently burning through literally a good chunk of all the cash in the world and they will eventually need to make even more gigantic profits to repay that cash. And the only one that is currently making money from AI seems to be NVIDIA, by selling the hardware that powers the AI giants.
I’m not saying that it IS all a bubble, by the way, as I can’t read the future and these gigantic profits might well materialize in the future. I’m just saying that “bubble” and “useless” are different.
Would you pay 500 dollars a month to have the possibility to do your movie searches? Or alternatively, would you like your LLM of choice to counter that, having read all your emails and browser history, you are probably interested in a totally different movie that just happens to be playing now at a nearby cinema?
There might be a more direct parallel than originally intended in this with the explanation how one person works hard all day and makes less than another person who pushes a few buttons. The latter knows which buttons to push.
This technology is useless for my movie searches, but it might be useful in the same way as radar was for air defense.
BTW, I’m not sure what I’d choose if offered to pay 500 dollars for knowing what that movie is. There’s one girl, if she’d be interested too to find that movie, perhaps I would.
So if such an expensive technology would allow this kind of nuanced search, and more seemingly efficient wouldn’t, then we have a use case.
Or a model allowing to predict actions of other people sufficiently well, based on seemingly not precise enough data. However much it would cost, that would be justified, similarly to high-frequency trading, because it would operate on all existing value, not just what it generates.
I’m not saying that it IS all a bubble, by the way, as I can’t read the future and these gigantic profits might well materialize in the future. I’m just saying that “bubble” and “useless” are different.
I know, I was making two points, one is that everything is relative (what you’ve just agreed to), another is that it might not at all be a bubble.
On the air defence note, specialist systems are already amazing at tasks like this and can usually run fine on high end consumer tier hardware (up to a single server rack) rather than data centres with the power requirements of small countries. AI is here to stay but LLMs are absoloutely a bubble.
OpenAI is more like Enron that NVidia I would assume.
Nvidia is Cisco in this analogy
Narrator: it was Enron
Me: Come on, pop already. There are funds betting on AI bubble burst, ready for me to invest in.
If you want to get advantage from a speculative fund making a bet on a popped bubble, then you need to be already invested now, before the bubble bursts. (And also, you/your fund need to be right that it’s really about to pop now, and not later)
Once the race is over it’s too late to bet on the ponies.
Nvidia is just selling overpriced premium shovels in a gold rush. They don’t care if there’s gold there or not.
Enron went bust by hiding debts. Making a loss is one thing, but lying about it to shareholders (and getting found out) is a one way trip out of the stock exchange.
Regurgitating Zitron with kid gloves.
https://www.wheresyoured.at/nvidia-isnt-enron-so-what-is-it/
LinkedIn perverts could write long screeds about AI…
Lmao
The SP500 is starting to look like NVIDIA -> companies NVIDIA is investing in -> everyone else. Its starting to get NVIDIA heavy. If they go down…SP500 is gong to look terrible.
It’s a bad position to be in. If they crash it will be bad, but if they keep growing and then crash it could be worse.
Perfect place to be in to get a bailout. Nothing better than to pump it to the max and try and make it some one else’s problem
America is about to learn the lesson Nortel taught Canada.
