Nvidia invested $2b into CoreWeave for 9% equity stake. CoreWeave is spending $35b in CapEx in 2026. Therefore, Nvidia's investment is only 5.7% of CoreWeave's single year CapEx. The other $32b is coming from other sources that isn't Nvidia. This is hardly circular.
Nvidia invests in Neoclouds because it's a hedge against hyperscalers having too much power, ie designing and prioritizing their own chips, and not fully using Nvidia's rack design. Neoclouds give hyperscalers competition. Neoclouds accept Nvidia investments because it allows them to secure Nvidia chips first, which is a competitive advantage since new Nvidia chips have been as much as ~5-20x more efficient than old Nvidia chips.
Nvidia was planning to directly compete against hyperscalers through DGX Cloud. They cancelled public DGX Cloud access when they found that investing in Neoclouds would accomplish the same goals without having to compete against their biggest customers.
If you're Nvidia, it's smart because Neoclouds that you have a large stake in will deploy your full stack from GPUs to networking to storage racks. They will share valuable usage data back to you so you can design a better next generation. Hyperscalers are likely a lot less cooperative, prefer to use their own designs if possible, and will guard their usage data.
My understanding is that it's not about the money itself but the model:
- you fund a new company and sign long terms contracts with it
- this new company uses the money you gave it and a lot of debt (backed by long term contracts) to build datacenters and buy a lot of GPU
- your figures look great
What happens when they run out of debt or funds? If they reach some kind of profitability it's not a big deal, but if not ...
EDIT
Forget to mention the buyback of unused capacity problem: what happens to your figures when you have to buy back tons of unused GPUs?
Yes, circular financing is not by itself a problem.
It being that size, lasting for that long, and the total lack of viable products created by it are the problem. Financing only adds leverage, that makes every loss or profit larger.
You're probably just responding to the headline but this person is an AI bull and isn't claiming it's a big deal, she's going into it and explaining it.
People are looking for the AI bear case - so this headline gotta work better. Its not a bad idea haha. More people suspect there is some circular shenanigans but want confirmation -- so maybe this is the best way to lure them in. Come as the bear, stay for the bull.
With just these 2 comments, now I'm really gonna read that article.
> Why is it a big deal? Nvidia invested $2b into CoreWeave for 9% equity stake.
Depends if they actually got the $2b in real money. There's a difference.
It's a big deal if no money was involved. Nothing even entered the company directly. Some deals have structured with Special Purpose Vehicles where money goes to the SPV. The SPV buys GPUs with it (from Nvidia). GPUs is loaned back to the company involved. So this company is stuck with this GPU rental, which may or may not be what they want and not $2b.
This sounds like a bad deal? So Nvidia had to sweeten the deal and promise min utilization on those GPUs by renting it themselves even if they don't need it.
Circular financing is a dead horse - dont beat it. Instead, what is more interesting could be: Is there a path to these builds becoming economically profitable ? Towards this, some metrics to watch are: 1) ROI per token per dollar 2) Enterprise token budgets. And at what point there is an overbuild relative to the token roi. Alternatively, pressure on token costs due to the open weights models etc.
These questions can't really be answered now because things are moving too fast. That may explain why people are latching on to things they can prove like circular financing even if those arguments are pretty weak.
Might be a blessing in disguise that these companies can't roll out datacenters as quick as they want (due to financing, power issues, permit delays or whatever).
That puts a cap on surplus (potentially unused?) datacenter capacity that's around by the time the AI bubble pops.
I've said it before, I will say it again: all that circular investment, all the IOUs, all the billions of dollars of money that are floating around in the entire AI web... it will seriously wreck the US economy, the volume is orders of magnitude worse than what caused the 2007ff global financial crisis. But if OpenAI and Anthropic both manage to enter the fray as well and automatically get made part of the NASDAQ and MSCI World like SpaceX already did... yeah, then it will fry the US pension system alive as well.
boomers will "invest" at a loss in anything that has the AI tag, this is a non issue. the whole ecosystem can bled cash for another couple years while the usual suspects blabber on about the singularity to korean pension funds
I predict a 2030 end date for the bubble, as that is when many globalist think tanks declare they will invade Russia to take their resources, and it's unlikely even China can ignore that, and here comes World War III.
In case you didn't notice, nobody has invaded Russia since Hitler. Instead it has been Russia invading other countries, using whatever imaginary threat as an excuse.
You may be right about WW3 in 2030, but based on the track record it's more likely that Russia will be the invader.
> ... as that is when many globalist think tanks declare they will invade Russia to take their resources, and it's unlikely even China can ignore that, and here comes World War III.
Complete nonsense, for several reasons.
1. Are you saying that think tanks are saying now that they will invade Russia? If so, I want to see your sources. Or are you saying that you are confident now that think tanks will later say to invade Russia in 2030? If so, I want to see your logic.
2. "Think tanks declare they will invade Russia". Think tanks don't invade anybody, because they don't have armies. Think tanks can say whatever they want; they have to get someone with actual armies to agree.
3. Nobody with an army wants to invade Russia, resources or no. Russia is a terrible place to invade. It's too big, too far, too much strategic depth.
4. Current Russian military doctrine says that an invasion that is succeeding will be grounds for using their nukes. That probably won't mean just tactical nukes. If the military or the think tanks want any part of that, they're incompetent.
5. The resources are more in Siberia than in European Russia. The most likely successful invader would be China (if they're willing to run the risk of the nukes). If the globalist think tanks think that they are going to benefit, they aren't thinking.
Yeah, it's basically creating the illusion of demand and revenue. Lots of fraud in the past relied on companies "investing" into companies which then bought from the investor. I'm not sure to what degree this is happening now, though, and to what degree this is benign.
People are investing because if Nvidia are essentially buying shares with graphics cards then they're motivated to make this stuff work. If the invested in company's share price tanks, Nvidia loses out, and I imagine quite a few people are willing to win or lose alongside Nvidia.
In general for these deals, and the ones with SPVs even more we don’t know. It may be as straightforward as equity for GPUs, but not enough information has been released.
Why is it a big deal?
Nvidia invested $2b into CoreWeave for 9% equity stake. CoreWeave is spending $35b in CapEx in 2026. Therefore, Nvidia's investment is only 5.7% of CoreWeave's single year CapEx. The other $32b is coming from other sources that isn't Nvidia. This is hardly circular.
Nvidia invests in Neoclouds because it's a hedge against hyperscalers having too much power, ie designing and prioritizing their own chips, and not fully using Nvidia's rack design. Neoclouds give hyperscalers competition. Neoclouds accept Nvidia investments because it allows them to secure Nvidia chips first, which is a competitive advantage since new Nvidia chips have been as much as ~5-20x more efficient than old Nvidia chips.
Nvidia was planning to directly compete against hyperscalers through DGX Cloud. They cancelled public DGX Cloud access when they found that investing in Neoclouds would accomplish the same goals without having to compete against their biggest customers.
If you're Nvidia, it's smart because Neoclouds that you have a large stake in will deploy your full stack from GPUs to networking to storage racks. They will share valuable usage data back to you so you can design a better next generation. Hyperscalers are likely a lot less cooperative, prefer to use their own designs if possible, and will guard their usage data.
My understanding is that it's not about the money itself but the model:
- you fund a new company and sign long terms contracts with it - this new company uses the money you gave it and a lot of debt (backed by long term contracts) to build datacenters and buy a lot of GPU - your figures look great
What happens when they run out of debt or funds? If they reach some kind of profitability it's not a big deal, but if not ...
EDIT
Forget to mention the buyback of unused capacity problem: what happens to your figures when you have to buy back tons of unused GPUs?
Yes, circular financing is not by itself a problem.
It being that size, lasting for that long, and the total lack of viable products created by it are the problem. Financing only adds leverage, that makes every loss or profit larger.
> If they reach some kind of profitability it's not a big deal, but if not ...
What is the end of this sentence?
There are two types of people. Those who can extrapolate from incomplete data, and
... then it is a big deal.
Billions of dollars sounds like a literal "big deal", but not necessarily "a problem". Worst case for nVidia is they lose 2 billion dollars, NBD.
You're probably just responding to the headline but this person is an AI bull and isn't claiming it's a big deal, she's going into it and explaining it.
It's a bad headline because most of the article isn't about circular financing and it's only 5.7% of anyway.
Just the look and feel and the subscribe fixed position in particular, made me bounce.
People are looking for the AI bear case - so this headline gotta work better. Its not a bad idea haha. More people suspect there is some circular shenanigans but want confirmation -- so maybe this is the best way to lure them in. Come as the bear, stay for the bull.
With just these 2 comments, now I'm really gonna read that article.
Can someone even outline the AI bull case? I can’t fathom one at all.
https://isaiprofitable.com/
The only profitable company is the one running the scam.
> Why is it a big deal? Nvidia invested $2b into CoreWeave for 9% equity stake.
Depends if they actually got the $2b in real money. There's a difference.
It's a big deal if no money was involved. Nothing even entered the company directly. Some deals have structured with Special Purpose Vehicles where money goes to the SPV. The SPV buys GPUs with it (from Nvidia). GPUs is loaned back to the company involved. So this company is stuck with this GPU rental, which may or may not be what they want and not $2b.
This sounds like a bad deal? So Nvidia had to sweeten the deal and promise min utilization on those GPUs by renting it themselves even if they don't need it.
So what's income and what's expense here?
That's the problem. It's inflated and messed up.
Circular financing is a dead horse - dont beat it. Instead, what is more interesting could be: Is there a path to these builds becoming economically profitable ? Towards this, some metrics to watch are: 1) ROI per token per dollar 2) Enterprise token budgets. And at what point there is an overbuild relative to the token roi. Alternatively, pressure on token costs due to the open weights models etc.
These questions can't really be answered now because things are moving too fast. That may explain why people are latching on to things they can prove like circular financing even if those arguments are pretty weak.
if the money moves in circles the consequences of new money stopping when predicted profitability falls become a lot more dramatic
Might be a blessing in disguise that these companies can't roll out datacenters as quick as they want (due to financing, power issues, permit delays or whatever).
That puts a cap on surplus (potentially unused?) datacenter capacity that's around by the time the AI bubble pops.
Would this author prefer that Nvidia buy equity using GPUs directly? I don't think it actually counts as circular.
> I don't think it actually counts as circular.
It is. The GPUs go on to be used to get loans to then get more GPUs.
I've said it before, I will say it again: all that circular investment, all the IOUs, all the billions of dollars of money that are floating around in the entire AI web... it will seriously wreck the US economy, the volume is orders of magnitude worse than what caused the 2007ff global financial crisis. But if OpenAI and Anthropic both manage to enter the fray as well and automatically get made part of the NASDAQ and MSCI World like SpaceX already did... yeah, then it will fry the US pension system alive as well.
>> the volume is orders of magnitude worse than what caused the 2007ff global financial crisis.
Nobody lives in GPUs and what was the ratio of equity/debt for the toxic assets in 2007?
boomers will "invest" at a loss in anything that has the AI tag, this is a non issue. the whole ecosystem can bled cash for another couple years while the usual suspects blabber on about the singularity to korean pension funds
Isn’t that just what people tell themselves at the top?
https://www.currentmarketvaluation.com/models/s&p500-mean-re...
You're saying people tell themselves at the top that the run can continue for another few years?
That's how every bubble works.
I predict a 2030 end date for the bubble, as that is when many globalist think tanks declare they will invade Russia to take their resources, and it's unlikely even China can ignore that, and here comes World War III.
I just have a AWS Lambda function, who tracks if Pieter Thiel private plane is doing a run to New Zealand...
In case you didn't notice, nobody has invaded Russia since Hitler. Instead it has been Russia invading other countries, using whatever imaginary threat as an excuse.
You may be right about WW3 in 2030, but based on the track record it's more likely that Russia will be the invader.
Luckily there is nothing about the current period that reminds anyone of Hitler's time.
> I predict a 2030 end date for the bubble...
Plausible.
> ... as that is when many globalist think tanks declare they will invade Russia to take their resources, and it's unlikely even China can ignore that, and here comes World War III.
Complete nonsense, for several reasons.
1. Are you saying that think tanks are saying now that they will invade Russia? If so, I want to see your sources. Or are you saying that you are confident now that think tanks will later say to invade Russia in 2030? If so, I want to see your logic.
2. "Think tanks declare they will invade Russia". Think tanks don't invade anybody, because they don't have armies. Think tanks can say whatever they want; they have to get someone with actual armies to agree.
3. Nobody with an army wants to invade Russia, resources or no. Russia is a terrible place to invade. It's too big, too far, too much strategic depth.
4. Current Russian military doctrine says that an invasion that is succeeding will be grounds for using their nukes. That probably won't mean just tactical nukes. If the military or the think tanks want any part of that, they're incompetent.
5. The resources are more in Siberia than in European Russia. The most likely successful invader would be China (if they're willing to run the risk of the nukes). If the globalist think tanks think that they are going to benefit, they aren't thinking.
All financing is circular. This concern is beyond the pale contrived
Financing is circular because creating a liability for one party (debt) creates an asset for another (the bank) off of which more debt can be secured
A bank / financier sells trust and reassurance. They otherwise invent most money from thin air.
That’s not the point. The issue is that loaning/investing to a client so they can buy from you conflates your investments with your revenue.
It may be fine, or not. It it has been a frequent type of manipulation to obfuscate the real accounting situation.
Yeah, it's basically creating the illusion of demand and revenue. Lots of fraud in the past relied on companies "investing" into companies which then bought from the investor. I'm not sure to what degree this is happening now, though, and to what degree this is benign.
I’m not sure anyone can really say now, the terms and details are too opaque. But, given the history the opacity is itself a red flag.
People are investing because if Nvidia are essentially buying shares with graphics cards then they're motivated to make this stuff work. If the invested in company's share price tanks, Nvidia loses out, and I imagine quite a few people are willing to win or lose alongside Nvidia.
In general for these deals, and the ones with SPVs even more we don’t know. It may be as straightforward as equity for GPUs, but not enough information has been released.
Yandex, not nebius. Surprised how the world gets on kgb again and again, and again
Didn't they move to escape that world?
No one ever leaves the kgb