Business Nvidia's $100B OpenAI investment fuels AI bubble fears - AI is a hundred percent a bubble lol

Nvidia's $100 billion investment in OpenAI has investors questioning whether we're seeing too much circular investing: companies using their free cash flow to give their biggest customers money that will make a round trip back home.

Why it matters: Wall Street is already concerned about an AI bubble, and this kind of funding just adds fuel to the froth fire.
Catch up quick: Nvidia's OpenAI investment is meant to support data center buildouts.

• These data centers will likely run on "millions" of Nvidia chips, according to a statement from the company.
• Nvidia told the research firm Bernstein that its investment in OpenAI would not be used for any "direct purchases" of Nvidia products.

Zoom out: It's not just about Nvidia. All the large-cap tech firms are jumping on the circular financing train.

• Meta is in talks with Oracle about a $20 billion cloud computing deal, while Microsoft is pursuing a similar deal.
• Microsoft, Meta, Amazon, Alphabet and Tesla account for over 40% of Nvidia's revenue as they buy Nvidia's AI chips.
• The highly interconnected nature of the Big Tech names has Wall Street concerned about how much the market could drop if the AI bubble pops.

What they're saying: "It's kind of like having your parents co-sign on your first mortgage," Jay Goldberg, an analyst with Seaport Global Securities, said on Bloomberg Television, adding that the deal is "bubble-like."

• Goldberg is one of Wall Street's biggest Nvidia bears. He has the lowest price target on the stock among analysts tracked by Bloomberg, at $100 a share, 43% below the current Nvidia share price.

Yes, but: Other analysts tell Axios that circular investing is just how public companies and markets work.

• "I don't get why that is a problem," says Max Kettner, chief multi-asset strategist at HSBC. "That's the nature of business."
• If Nvidia is paying its customers to "just buy the AI capex," Kettner tells Axios, "in three years, once it's gone too high, too far, cool. You stop."

Flashback: Previous examples of vendor financing produced some "horror stories," according to a recent note from investor and Capital Gains substack author Bryne Hobart.

• Cisco in the 1990s: Lent money to telecom equipment companies because buildouts were expensive and demand was huge.
• This led to an overbuild, and Cisco's stock has been tarnished by the dot-com bust since.
• Hobart noted that this amounted to charitable donations for streaming platforms using this bandwidth later on.

The lesson? Suppliers can juice demand by lending, but there are overshoot risks.

• The hope? That it's different this time.

Threat level: Knowing when to stop buying and even sell is obviously the key question for investors who've been happy to ride this AI rally straight to the bank.

• One sell signal would be "an earning season where margins suddenly surprised to the downside by 1 or 2 percentage points," HSBC's Kettner says.
• To him, the bigger risk is not riding the rally rather than realizing a little too late that it's over.

What we're watching: Earnings estimates, which have not hit unbeatable levels just yet.

• If estimates outpace results, that could be the Kettner signal to sell.

L / A

 

[Jace on ice]

The 500 series cards are like 3k for 5-10 more fps over your 4070 and they removed PhysX support so retro games run like ass on them.

Boy it's a real fuckin mystery why people aren't lining up around the block to buy these.

There's nothing people love more than products getting both shittier and more expensive simultaneously.

 

[WielkiWapiesz2137]

I wonder if they know that next global recession is imminent and are pumping up AI as to be able to blame it for what they have done.

 

[Absolutego]

If you're only noticing the AI bubble at the stage where nvidia starts circular investing to boost their stock price for the next few quarters, you shouldn't be investing. The bubble was obvious when every major fortune 500 company was crowbarring AI projects into major sections of their annual stockholder reports when the technology hasn't made anybody rich yet except chatbot startups designed to get around the fact that modern search engines are jeet-operated dogshit designed to give you sponsored over relevant results.

I wonder if they know that next global recession is imminent and are pumping up AI as to be able to blame it for what they have done.

You are ascribing far too much long-term thinking to C-level big tech executives.

 

[Quijibo69]

In before we find out it's 500 Indians on computers.

 

[JohnnyG]

obvious when every major fortune 500 company was crowbarring AI projects into major sections of their annual stockholder reports

My favourite is when companies don't just chase fads with questionable relevance, but go full bore "this is going to be a Strategic Core of every business unit" without so much as a pilot run.

"McDonald's is excited to announce an Eleventeen Gorillion dollar investment to move its accounting, tax, and facilities management teams into the MetaVerse!"

 

[reptile baht spaniard rid]

AI is a fucking bubble like crypto wanted to be.

The cracks are showing in the dam, but how long will it last? Probably longer than you can stay solvent.

 

[draggs]

AI is a fucking bubble

It didn't have to be... okay maybe it did

Investing in fancy chatbots that have not and never will be indistinguishable from or better than the creative capabilities of the human brain made more bloodsuckers more money than investing in the things AI algorithms are awkshoolly useful at

 

[Agent Abe Caprine]

The 500 series cards are like 3k for 5-10 more fps over your 4070 and they removed PhysX support so retro games run like ass on them.

Boy it's a real fuckin mystery why people aren't lining up around the block to buy these.

There's nothing people love more than products getting both shittier and more expensive simultaneously.

They still have PhysX support, just not 32-bit PhysX. Games with 64-bit PhysX run just fine still. Also, Mirror's Edge is retro now? Thanks for making me feel old.

 

[deleuzeon]

My favorite part of investing 100 billion dollars in a project is that now it has to make 100 billion dollars back before it can make 1 dollar

 

[JackoVerde]

AI is a fucking bubble like crypto wanted to be.

The cracks are showing in the dam, but how long will it last? Probably longer than you can stay solvent.

There were entire power grids in major cities readjusted for the sole purpose of providing energy for AI warehouses. I think one company tried to buy a nuclear power plant to power their AI, 100s of billions of dollars investment and artificial stock price growth just for sole purpose of a mediocre chatbot.
When this bubble pops we’re gonna feel it hard.

 

[M€￦]

I think one company tried to buy a nuclear power plant to power their AI, 100s of billions of dollars investment and artificial stock price growth just for sole purpose of a mediocre chatbot.

I think that was Microsoft, who wanted to buy or had bought Three Mile Island. Crazy that they were desperate to buy a plant that almost had a nuclear excursion.

 

[grump]

AI is a fucking bubble like crypto wanted to be.

The cracks are showing in the dam, but how long will it last? Probably longer than you can stay solvent.

AI/machine learning is no fad....But that doesn't mean it can't be a bubble. I suppose it will probably be like the last time with with internet with all the gimmicky companies failing and a few Amazons becoming even more powerful than they are now.

 

[Kane Lives]

There were entire power grids in major cities readjusted for the sole purpose of providing energy for AI warehouses. I think one company tried to buy a nuclear power plant to power their AI, 100s of billions of dollars investment and artificial stock price growth just for sole purpose of a mediocre chatbot.
When this bubble pops we’re gonna feel it hard.

On the bright side, we might have lots of energy to spare once the bubble does pop.

 

[reptile baht spaniard rid]

AI/machine learning is no fad....But that doesn't mean it can't be a bubble. I suppose it will probably be like the last time with with internet with all the gimmicky companies failing and a few Amazons becoming even more powerful than they are now.

That's why it's such a dangerous hype machine, it DOES do something (AI = infinite jeet imitations, perhaps) but the absolute amount of money thrown at this fucking shit can never be recovered, even if it DOES result in sexbot AI slaves or someshit.

Unsourced rumor, but someone was saying that much of the S&P500 returns since AI started being big shit can be tied to Nvidia or four or five companies buying from Nvidia.

It's very like the Internet bubble and we're headed for another AI winter

 

[Cpt. Stud Beefpile]

The people calling this a bubble are huffing labratory-grade copium. Remember how fusion power was gonna save us all from fission/coal/etc.? Well, AI has advanced more in 20 years than fusion power since motherfucking 1960. AI has arguably done more useful tasks in 10 years than the entire sad-ass excuse for a "space program" since the last American left the moon to go home to a planet where computers needed entire rooms and dedicated refrigeration systems.

All the capabilities it provides in surveillance are (sadly) very concrete to everyone from a middle manager who wants to micromanage the wagies on his team as much as humanely possible to tyrannical governments the world over. It's taking over content creation by storm, partly because Hollywood is completely out of good ideas, partly because any schmup with a decent computer and a half-good idea can make a decent solo project (if they bother to put the effort in) that they could only dream of doing in early 2000's.

Not to mention whoever manages to successfully pair a good-enough female android chassis with a good-enough AI is going to be filthy stinking rich and wield huge amounts of influence.

 

[Robbyretard]

If you're only noticing the AI bubble at the stage where nvidia starts circular investing to boost their stock price for the next few quarters, you shouldn't be investing. The bubble was obvious when every major fortune 500 company was crowbarring AI projects into major sections of their annual stockholder reports when the technology hasn't made anybody rich yet except chatbot startups designed to get around the fact that modern search engines are jeet-operated dogshit designed to give you sponsored over relevant results.

More like, 2 years ago.

 

[Robbyretard]

I still say, Nvidia is the next Enron/worldcom.

​

 

[Syntaxion]

The people calling this a bubble are huffing labratory-grade copium. Remember how fusion power was gonna save us all from fission/coal/etc.? Well, AI has advanced more in 20 years than fusion power since motherfucking 1960. AI has arguably done more useful tasks in 10 years than the entire sad-ass excuse for a "space program" since the last American left the moon to go home to a planet where computers needed entire rooms and dedicated refrigeration systems.

All the capabilities it provides in surveillance are (sadly) very concrete to everyone from a middle manager who wants to micromanage the wagies on his team as much as humanely possible to tyrannical governments the world over. It's taking over content creation by storm, partly because Hollywood is completely out of good ideas, partly because any schmup with a decent computer and a half-good idea can make a decent solo project (if they bother to put the effort in) that they could only dream of doing in early 2000's.

Not to mention whoever manages to successfully pair a good-enough female android chassis with a good-enough AI is going to be filthy stinking rich and wield huge amounts of influence.

It's a bubble because it doesn't make any money, especially in the long run and ESPECIALLY compared to how much is pumped into it (investors for example). They lose money on every prompt, every generation. It's propped up with theoretical future AGI and an arms race between companies and a bizarre ecosystem that shifts the costs.

Some AI simpsons generator, using some AI frontend, that uses infrastructure that uses OpenAI. There is no feasible way for this to work. It's why microsoft, google, etc put AI everywhere. Create value that isn't there. It's not wanted and adds nothing in the end, but gives it a purpose

AI companies have the same view as companies during the dotcom bubble. Or banks in 2007. Or any company during a bubble

 

[Headdot Reddot]

It's why microsoft, google, etc put AI everywhere. Create value that isn't there. It's not wanted and adds nothing in the end, but gives it a purpose

Also because AI allows them to spy on you in a new novel way that circumvents the usual methods of avoiding being tracked online by advertisers and data thieves. Just like how Microsoft Word will now automatically backup every document you create on its cloud, with no option to opt out. They'll be able to see everything you type on it.

Whoa soooooo cool!