"Nvidia has plowed plenty of money into the AI space, with more than 70 investments in AI companies just this year, according to PitchBook data. Among the billions it's splashed out, there's one important category: neoclouds, as exemplified by CoreWeave, the publicly traded, debt-laden company premised on the bet that we will continue building data centers forever. CoreWeave and its ilk have turned around and taken out debt to buy Nvidia chips to put in their data centers,"
"While I am impressed by the sheer amount of nerd energy put into this question, I do feel this somewhat misses the point: the loans mean that Nvidia has an incentive to bail out this industry for as long as it can because the majority of GPU-backed loans are made using Nvidia's own chips as collateral. Of course, that also means that if something goes wrong with Nvidia's business, this whole sector is in trouble."
Nvidia has invested heavily in the AI ecosystem and its investments enable neoclouds like CoreWeave to borrow against Nvidia GPUs. Many neoclouds take on debt to purchase Nvidia chips and use those same chips as collateral, amplifying Nvidia-driven demand. GPU-backed loans concentrate exposure because lenders and borrowers rely on the chips' continued value and Nvidia's position. If GPU values or Nvidia's business face disruption, lenders, neoclouds, and startups are exposed to sharp losses. Increasing competition for chips and questions about depreciation raise doubts about the sustainability of this debt-fueled build-out.
Read at The Verge
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