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Nvidia insists it isn’t Enron, but its AI deals are testing investor faith (www.theguardian.com)
submitted 10 months ago by to c/technology@lemmy.world
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[–] 67 points 10 months ago (8 children)

Enron crashed because they were cooking their books and faking income, declaring potential profit where none existed

  • Sell chips to X

  • Receive stock in X

  • Value of stocks = discounted sum of future (fake) income

  • Booked as an asset on the balance sheet

This is exactly like Enron but the underlying commodity isn't energy, it's compute.

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  • [–] 8 points 10 months ago (6 children)

    Nvidia sells plenty of GPUs for actual money, they are good for it.

    No, the real issue is the depreciation for the people owning GPUs. Your GPU will be usable for 4-6 years, and 2-4 of those years will be spent as ”the cheap old GPU. After that time, you need new GPUs. (And as the models are larger by then, you need moahr GPU)

    How the actual fuck do these people expect to get any ROI on that scale with those timeframes? With training, maybe the trained model can be an asset (lol), but for inference there are basically no residual benefits.

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  • [–] 6 points 10 months ago (1 child)

    I'm still rocking a GTX970 from 2014

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  • [–] 9 points 10 months ago

    Do this:

    • Calculate the total power cost of running it at 100% load since 2014
    • Calculate Flops/Watt and compare with modern hardware
    • Calculate MTTF when running at 100% load. Remember that commercial support agreements are 4-5 years for a GPU, and if it dies after that, it stays dead.
    • In AI, consider the full failure domain (1 broken GPU = 7+ GPUs out of commission) for the above calculation.

    You’ll probably end up with 4-6 years as the usable lifetime of your billion dollar investment. This entire industry is insane. (GTX 1080 here. Was considering an upgrade until the RAM prices hit.)

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  • [–] 4 points 10 months ago

    That's Michael Burrys thesis. Higher depreciation for GPU owners is a positive for Nvidia because they end up buying more GPUs.

    I'm highlighting the the future revenue of those customers that Nvidia has booked in terms of equity. That is equivalent to Enron. Here the SPVs are named companies like OpenAI and other model developers.

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  • [–] 3 points 10 months ago

    I feel like what sounds personally insane to us (and is, don't get the wrong idea), to the people making such decisions the situation is more like -

    "Emerging market with unknown upside thanks to new and evolving capabilities, exploration and competitive advantage shaped and constrained, globally, by hardware capability. Not my money I'm betting, 'risk' is extreme opportunity for me, negative consequences borne by others. Let's go"

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