The amount of Big Tech cash flow being diverted into capital investment coupled with the lack of viable business models to actually fund that outflow of cash is outright scary.

A lot of parallels here to infrastructure buildouts leading up to the .com implosion. A lot of dark fiber got dusted off later and used, but unclear if the present buildout of GPUs will have similar decades-long utility.

This is a lengthy introduction. The complete post requires a subscription.

They know they aren't going to get it, the goal however is to be the one that does get their share of it back.

If OpenAI gets their $500B back, they don't care that everyone else lost $1.5T.

Just a caution, this guy is a Gary Marcus-like perennial chicken little, this isn’t some discovery or realization, it’s just an ongoing part of someone’s identity as an AI bear.

"Jensen Huang claims — without any real breakdown as to who is buying them — that NVIDIA has over $500bn in bookings for its AI chips, with little worry about whether there’s enough money to actually pay for all of those GPUs or, more operatively, whether anybody plugging them in is making any profits off of them."

Does NVIDIA care if the company that bought their chips cannot make money using their chips? As long as the company's money is transferred into NVIDIA's accounts, that's all that matters to NVIDIA.

"During a goldrush, sell shovels"

This is not true because of how money works. Take mortgages. You might think that if the bank borrows you $100 to buy a house, it is now dependent on you paying back $100. In fact the reverse is true. Fractional reserve banking, you can find plenty of explanations that this "creates" money, that the banks can use or pay out to investors.

The wealth of a small set of banks is essentially the total money that's lent out. The wealth of a set of banks PLUS the government literally is the total money lent out. In other words: if houses start being owned "naked" (meaning no mortgage), either through bankruptcy or just paying off the loan, that's when banks

So let's say you have a circular loan. Nvidia -> MS -> OpenAI -> Nvidia. You have just created money (since it won't ever be paid back), and what you're dependent on is the valuation of the companies in the chain going up always, there is some leeway of course but it can't really drop.

If the money keeps circulating, the money "rotating" effectively becomes money these companies can spend (whether on stock buybacks or extra chips or management raises or ...) You hopefully also see that you or I, or anyone external cannot cause this situation to collapse, only the companies in the chain can (but have extreme incentives not to). The system collapses, of course, if one of these companies goes bankrupt, but until then there's nothing that can stop it.

And because of this it will make those companies "Too big to fail".