asbestos@lemmy.world 3 weeks ago
ELI5?
I haven’t read the article, but I have read previous accusations of the same thing, so I assume it’s the same.
Basically, the new AI companies are all losing money, but they are all investing big money in each other which makes it look like the industry is doing well.
I think this snippet get the gist across:
The money flows in loops: Nvidia invests in AI startups, startups commit to cloud spending, cloud providers purchase Nvidia hardware, Nvidia recognizes revenue, but the cash never completes the circuit because the underlying economic activity—AI applications generating profit—remains insufficient.
“Every public company now faces machine-speed scrutiny of accounting practices. Anomalies that might have persisted for quarters until human analysts identified patterns now trigger immediate algorithmic responses.”
Godnroc@lemmy.world 3 weeks ago
If I gave you $5 and then you gave it to someone else and then they gave it back to me we’ve done nothing but can call it $15 in business transactions.
KiwiTB@lemmy.world 3 weeks ago
Nvidia invests in company… Company buys Nvidia items… Nvidia stock goes up… Nvidia has new pretend money to invest into another company…
Zorque@lemmy.world 3 weeks ago
And this is news to people?
KiwiTB@lemmy.world 3 weeks ago
Apparently so.
hemmes@lemmy.world 3 weeks ago
Question is: which of those is truly the best short play?
ctrl_alt_esc@lemmy.ml 3 weeks ago
Why would nvidia have new money to invest when its stock goes up? That’s not how the stock market works, you buy stock from other investors, not the company. Unless they finance all their investments with debt and use their higher valuation to get easier access to that financing. Which seems unlikely.
Don’t get me wrong, I 100% think AI is a crap bubble, but I don’t think you understood how this scam works.
trolololol@lemmy.world 3 weeks ago
NVIDIA sells GPUs to Oracle. Oracle sells GPU time to openai.
When time comes to pay the bills, openai doesn’t have the money to pay Oracle who then doesn’t have money to pay NVIDIA. So, Oracle gives stock to NVIDIA, and openai also gives stock to NVIDIA.
NVIDIA doesn’t care if both go broke because now a gpu is worth a lot more, and in the books they’re selling a lot more GPUs each for a lot more money. So NVIDIA stock goes through the roof even if they ran out of cash and got into ridiculous debt.
Shareholders have a ridiculous profit, NVIDIA directors get a massive bonus and NVIDIA CEO gets famous.
Croquette@sh.itjust.works 3 weeks ago
Because higher stock value means more collateral for debt.
You’d be surprised on how much debt is used in even small companies.
SaveTheTuaHawk@lemmy.ca 3 weeks ago
Companies issue new stock to raise capital all the time.
phutatorius@lemmy.zip 3 weeks ago
The company can issue more stock, not just use debt for its financing. And the value of the new stock is strongly influenced by the market price of the stock that has already been issued.
phutatorius@lemmy.zip 3 weeks ago
That’s why transactions are defined as the exchange of something of value. In most legal systems, if you’re caught swapping phony transactions like that, you can be prosecuted for fraud.
Agent641@lemmy.world 3 weeks ago
I think I understand. Can… Can I have the $5 now please?
SaveTheTuaHawk@lemmy.ca 3 weeks ago
300% profit! Where’s my bonus!
Godnroc@lemmy.world 3 weeks ago
You are allowed to take an extra 15-minute break.
But it has to be used this week. And during quiet times. And not within an hour of any other break. Or the start and end of your work hours. And not on any day that ends in Y.