NVIDIA frenemy relation with OpenAI and Oracle(philippeoger.com) |
NVIDIA frenemy relation with OpenAI and Oracle(philippeoger.com) |
Here is a possible roadmap for the coming correction:
1. The Timeline: We are looking at a winter. A very dark and cold winter. Whether it hits before Christmas or mid-Q1 is a rounding error; the gap between valuations and fundamentals has widened enough to be physically uncomfortable.
The Burry thesis—focused on depreciation schedules and circular revenue—is likely just the mechanical trigger for a sentiment cascade.
2. The Big Players:
Google: Likely takes the smallest hit. A merger between DeepMind and Anthropic is not far-fetched (unless Satya goes all the way).
By consolidating the most capable models under one roof, Google insulates itself from the hardware crash better than anyone else.
OpenAI: They look "half naked." It is becoming impossible to ignore the leadership vacuum. It’s hard to find people who’ve worked closely with Altman who speak well of his integrity, and the exits of Sutskever, Schulman, and others tell the real story.
For a company at that valuation, leadership credibility isn’t a soft factor—it’s a structural risk.
3. The "Pre-Product" Unicorns: We are going to see a reality check for the ex-OpenAI, pre-product, multi-billion valuation labs like SSI and Thinking Machines.
These are prime candidates for "acquihres" once capital tightens. They are built on assumptions of infinite capital availability that are about to evaporate.
4. The Downstream Impact:
The second and third tier—specifically recent YC batches built on API wrappers and hype—will suffer the most from this catastrophic twister.
When the tide goes out, the "Yes" men who got carried away by the wave will be shouting the loudest, pretending they saw it coming all along
> leadership credibility isn’t a soft factor—it’s a structural risk.
> The Timeline/The Big Players/The "Pre-Product" Unicorns/The Downstream Impact
If you really just write like this entirely naturally then I feel bad, but unfortunately I think this writing style is just tainted.
It's true SRAM comes with your logic, you get a TSMC N3 (or N6 or whatever) wafer, you got SRAM. Unfortunately SRAM just doesn't have the capacity you have to augment with DRAM which you see companies like D-Matrix and Cerebras doing. Perhaps you can use cheaper/more available LPDDR or GDDR (Nvidia have done this themselves with Rubin CPX) but that also has supply issues.
Note it's not really about parameter storage (which you can amortize over multiple users) it's KV cache storage which gets you and that scales with the user count.
Now Groq does appear to be going for a pure SRAM play but if the easily available pure SRAM thing comes at some multiple of the capital cost of the DRAM thing it's not a simple escape hatch from DRAM availability.
It'll be interesting to see if we get any kind of non-NAND persistent memory in the near future, that might beat some performance metrics of both DRAM and NAND flash.
- Strange paragraph-lists with bolded first words. e.g. "The Cash Flow Mystery"
- The 'It's not just X; it's Y' meme: "Buying Groq wouldn't just [...], it could give them a chip that is actually [...]. It’s a supply chain hedge."
Tells like:
- "My personal read? NVIDIA is [...]"
- "[...]. Now I'm looking at Groq, [...]"
However, even if these parts were AI generated, it's simultaneously riddled with typos and weird phrases:
- "it looks like they are squeezing each other [sic] balls."
- Stylization of OpenAI as 'Openai'.
Not sure what to make of this low-quality prose.
Even if the conclusion is broadly correct, that doesn't mean the reasoning used to get there is consistent.
I do, at least, appreciate that the author was honest up-front with respect to use of Gemini and other AI tools.
Final grade: D+.
> As we head into 2026, when looking at Nvidia, openai and Oracle dynamics, it looks like they are squeezing each other balls.
Yeah I don't think there's a snowball's chance in heck that an LLM wrote that one, lol. My best guess is that the author combed over some of their prose with an LLM, but not all.
This is the conclusion of a reply that focused entirely on critiquing OP's style/AI use instead of their reasoning? Ironic.
If I do, it just so happens I have a ten thousand word rebuttal for you…
You might want to get your facts right first when flinging accusations. Like, this fact is trivial to check! Why didn't you?
(Not an endorsement of either of the articles.)
A lot of it is AI slop, but still.
2. I don't want people to see my disparagement of the quality of prose in this article as indication of personal agreement or disagreement with any of the points in the article. I have no horse in this race. I just want to read high-quality material. I love HN, but I'm not sure how much longer HN will be a place I can frequent in this respect. Have the hills not eroded? What of childlike curiosity?
3. My comment is nothing special. Others also point out portions of this article may be AI generated. People can verify the contents of my comment independently and come to their own conclusions. It does not require that I lean on implied authority of some form.
I read a lot, it's basically all I do. I wish writers maintained the contract of spending at least as much energy writing out ideas as they expect their audience to expend while reading them.
I will now log out of this account and lose the password. I hope this was helpful. I intend no malice; I'm sure the author of this piece is a kind person and fun to hang out with. I hope they take this feedback the right way.
Regardless of it is was fully or partially written by AI, do you agree with the main points? Do you disagree?
the inconsistent capitalization, the odd punctuation, and the grammar mistakes. Love it.
I want this article to stay on the front page because it is hilarious.
Michael Burry is betting against AI growth translating into real profits as a whole, not the circular funding.
NVIDIA's historic DSO figures have also ranged from 41 to 57 over the last 5 years, so again not that crazy.
This is the second article that gained a lot of traction on HN in the last few months with similar fundamental errors. The previous one was similarly written by someone with a dev background where they didn't understand the difference between gross margins, operating profit, and net income–concepts which were the basis for their analysis.
I wonder with this author or the previous, if they're just a little too confident in their abilities. Accounting and Finance are very deep and highly technical fields. Particularly for publicly traded companies where the businesses tend to be very complex and sophisticated and the consequences for making mistakes or committing fraud are severe. I'm not suggesting that non-finance people shouldn't try to analyze this stuff, but some humility might be in order.
It reminds me of a data scientist I worked with who was doing some modeling on companies' revenues. He believed he'd uncovered some secret, conspiratorial truth about Samsung having trillions in revenues, thereby making it the largest and most powerful entity on Earth. We had to gently inform him that he was looking at the revenues denominated in Korean Won and they needed to be converted to USD.
DRAM and logic fabs are both sold out so replacing one with the other doesn't really help. And SRAM uses ~6x more silicon area than DRAM.
Groq may be undervalued but not for supply chain reasons.
Groq isn’t listed is it? Hard to know what its valuation might look like.
I don't see why. Graphcore bet on SRAM and that backfired because unless you go for insane wafer scale integration like Cerebras, you don't remotely get enough memory for modern LLMs. Graphcore's chip only got to 900MB (which is both a crazy amount and not remotely enough). They've pivoted to DRAM.
You could make an argument for buying Cerebras I guess, but even at 3x the price, DRAM is just so much more cost effective than SRAM I don't see how it can make any sense for LLMs.
Open to being corrected on this stance as I'm armchair qb'ing this (on a legitimate, factual basis, not a "but dude this is how I'm going to eat for the next few years" basis).
If the baker sells bread to the butcher, and the butcher sells meat to the baker then they can still both go to bed with a belly full of sandwich (aka actual utility & substance).
Adding a third party to make it look more circle-y doesn't change that logic.
Round trip financing is mostly an issue if it is artificial (e.g. a circle of loans) and between affiliated parties, not when something of substance is delivered. Oracle is a business partner of nvidia but I'd wager they'll still kick up a fuss if they don't get their pallets of GB200s. They'll expect actual delivery...like you know...in a real sale.
So basically like any business out there reliant on incoming cash to pay suppliers?
This doesn't magically create money any more than the rest of the economy...which has believe it or not CIRCULATING money
You need something of substance exchanged, not just delivered. Nvidia hasn't gotten anything of substance from OpenAI yet.
I don't know shit about AI, but Nvidia could still give me $100b to buy their GPUs. Now I build a datacenter and Nvidia gets to claim $100b worth of sales AND a $100b stake in my datacenter. As I understand it, that's what's earning Nvidia all this side-eye.
Basically, the gold rush has reached a point where the shovel seller wants a stake in the operation.
I wonder if we would one day have a situation where NVIDIA no longer wants to sell chips to anyone and just use them themselves. Some special developments would have to occur to reach this point I think.
If I wanted to read Gemini's opinion about this issue with the voice of a crank technical analysis, I would
That, combined with some cooling from an AI hype bubble burst (see separate articles about companies missing quota as folks aren’t buying as much AI as the hype hoped) and there’s a potential ugly future where the headline demand plummets in top of idle chips waiting to be powered on. Suddenly the market is flooded with chips nobody wants.
I can see how you could make an argument that this particular ouroboros has an insufficient loop area to sustain itself, or more significantly, lacks connection to the rest of the economy, but money has to flow in circles/cycles or it doesn't work at all.
Btw there are examples involving sanctioned economies. Most US saffron comes from Spain, all of whose saffron comes from Iran. Azerbaijan exports way more gas than they produce, cause they also buy from Russia.
When interests directly align and parties are largely owned by the same people, its wash trading.
The point of wash trading is to make activity increase the value of an asset via a netzero activity. Since nothing is generated from the activity its circular, eg, nothing physical changes hands.
Crypto trading is the golden child of wash trading as the primary mode of increasing the value of an asset.
Its unsurprising then that the company that got rich on crypto wash trading is doing its own attempts to drive artificial demand.
There is no circular funding. There’s certainly circular speculation that is driving up the prices but the revenues are all accounted.
The DSO change is meaningless if you understand accounting.
The inventory building up is the cost of materials and incomplete inventory. It’s not chips sitting around waiting to be deployed.
> holding ~120 days of inventory seems like a huge capital drag to me.
Yeah I guess this guy who knows nothing about running a business like Nvidia is allowed to make confident statements like this despite no education or experience.
This article is garbage and he wasted his 48 hrs investigating the same things I read in another worthless tweet several weeks ago.
- **The Cash Flow Mystery**: ...
- **The Inventory Balloon**: ...
- **The "Paper" Chase**: ...
If it's correct, it's usually because a better source has already written it correctly, or because it's trivial to somebody who knows what they're talking about.
AI writing is a sign that the author either doesn't know the material, doesn't want to write it, or both. Because distinguishing "too lazy to write it" and "too stupid to fact-check it properly" is very difficult on my end as a reader, it's better to be safe than sorry. There's no sense in exposing my malleable wetware to slop of unknown provenance.
There has been no shortage of human authors writing about this topic. I don't know who "Philip Pieogger" is, so I have no reason to prefer him as a co-author.
> Here is my take on the hardware market, the "frenemy" dynamics between OpenAI and NVIDIA, and the "circular financing" theories that everyone—including Michael Burry, has been talking about.Dead internet much?
That seems more nefarious than buying products from each other. Either way it worked out fine for Apple.
Money circulates; it's what it does. The real question is to what extent circulation among a small group of firms is either collusion in disguise (i.e. decisionmaking by only one actual entity falsely measured as multiple independent entities) or a fragile ecosystem masquerading as a healthy one (i.e. an "island economy" where things look great in the current status quo, but the moment the fish go away the entire cycle instantly collapses).
[0] consider pagerduty, incredibly profitable with little revenue growth. Trading at 1.5X revenue, where high revenue growth, unprofitable companies are trading at 10X revenue.
It's not that different to any type of vendor financing. Vendor financing is legit, if done legitimately.
The real story is that Nvidia is accepting equity in their customers as a payment for their hardware. "What, you don't have cash to buy our chips? That's OK, you can pay by giving us 10% of everything you earn in perpetuity."
This has happened before, let's call it the "selling the goose that lays golden eggs scan." You can buy our machine that converts electricity into cash, but we will only take preorders, after all it is such a good deal. Then, after bulding the machines with the said preorder money, they of course plugged the machines in themselves instead of shipping them, claiming various "delays" in production. Here I'm talking about the bitcoin mining hardware when the said hardware first appeared.
Nvidia is doing similar thing, just instead of doing it 100% themselves, they are 10% in by acquiring the equity in their customers.
even better, we take preorders, while we delay for 1 year, we run the ASICs ourselves with way outsized TH/s power compared to the world. Once we develop the next one, we release the 'new' one to the public with 1/10th of the power.
There's a lot of "shoulds" that go out the window when you're basically in a hype cycle. We're high stakes rolling at this point. It's a matter of when the house goes broke.
>Michael Burry is betting against AI growth translating into real profits as a whole, not the circular funding.
One can lead to the other.
Is that bad? Depends. Did the purchase of chips make sense. Would they have done that if someone else say an independent entity invested?
Their shares have been tanking for a month, even after a very good earnings report, so perhaps the market seeks a little more diversity?
/not an investing/finance/anything to do with money expert.
[0] https://www.bloomberg.com/news/features/2025-10-07/openai-s-...
[1] https://www.cnbc.com/2025/12/04/nvidia-has-a-cash-problem-to... -- Actually "Cash and short-term investments", not sure what is included in that, but I don't think it includes these major deals.
And how inflation and interest are accounted.
> Michael Burry is betting against AI growth translating into real profits as a whole, not the circular funding.
It's not even so much that he's betting against that translating into profits, but rather that the pace of infrastructure investments is too out of sync with the timeline of realizing those profits, and also that throwing money at the problem doesn't necessarily move that break-even ROI timetable forward in a sustainable way (beyond a certain point).
That's what popped the DotCom bubble. It was the fundamental fallacy that potential profits and revenues were directly proportional to and/or dependent on investment, and even more specifically that more investment would realize not just greater returns, but the belief that more investment yielded greater return sooner which just wasn't true - at least not beyond a certain point. So while many people associate the Pets.com flop with the dotcom bubble, it was actually over investment in and by Cisco (chiefly, but not solely) that really precipitated the bubble bursting.
A lot of people see lots of parallels with the AI bubble in that context. If the ROI timeframe is greater than the viable lifecycle of hardware bought today, how wise is it to spend big today? Does it accelerate the timeframe if you spend more, and if so by how much, and up to what point? There's also something to be said about market momentum and strategic positioning, but that's hard to quantify, especially in the context of forecasting how impactful it will be on realizing your ROI at some indefinite point in the future.
Circular thing is bad too but from a different angle, Imagine if the whole TPU vs GPU thing erodes Nvidia's moat and its profit margins compress. if that happens how long it can keep feeding the same unproductive 'pets.AI' type startups? one break in the narrative and tragedy of commons strikes. will it happen soon? anybody's guess but given Trump is at helm and there is going to be new Fed chief, I doubt it would be anywhere near soon. Definitely not before mid-terms are locked in.
If you want to argue that the reasoning in the essay is incorrect, I do expect you to refute the reasoning instead of merely attacking the source.
Also, "the asset" here means stocks of a company that is losing billions dollars per year. OpenAI has no clear path to become profitable, especially given the fact that Google has just leaprfroged them with their Gemini 3 model.
Just FYI, the latest X3D flipped the stack; the cache die is now on the bottom. This helps transfer heat from the compute die to the heatsink more effectively. In armchair silicon designer mode, one could imagine this setup also adds potential for multiple cache dies stacked, since they do interpose all the signals, why not add a second one ... but I'm sure it's not that simple, for one: AMD wants the package z-heights to be consistent between the x3d and normal chip.
Ever heard of them? What do you think? Vaporware?
Nothing wrong with #1 on its own of course, but if we're talking about what we'd like to see here then I'd lean more towards the value in discussions with individuals in the community than the value in the prose of the articles/comments.
On that note, if anyone ever suspects a certain account/comment set as actually being nefarious, the note to reach out to hn@ycombinator.com in the guidelines is no lip service - they really do look right into it and get back to you (often with speedy action about it too). It's by far the best action you can take to keep the community feeling in the comments when you think it's actually occuring!
Culture shifts, even If you want to pretend you're beyond trends. I know HN wants to say "we're not Reddit" but cultural osmosis from Reddit and the internet at large will change how you interact even here.
That said:
>I wish writers maintained the contract of spending at least as much energy writing out ideas as they expect their audience to expend while reading them.
Maybe they did. Thing is that it's rare to be a skilled orator and a highly technical person (AKA the audience here). I could spend 20 hours writing this piece (after researching) and it'd be worse than someone who spent 2 hours writing it up but basically write full time. Don't let aptitude be confused with effort.
Second order effects are that everyone serviced by AI today will need even more AI tomorrow. Nvidia is there for that. They're increasing AI proliferation.
By increasing the number of engineers, dollars, watts spent on GPU, Nvidia grows its market.
The added benefit here is that Nvidia gets to share in the upside if any of these companies succeed in their goals.
It's as if Microsoft had Azure back before the doctom boom and took investments in Google, Amazon, and Facebook in exchange for hosting them. (And maybe a few misfires, like WebVan.)
This is really smart chess play.
- "Our coin hit $100M daily volume, get on this rocketship before it's too late!"
- "Our exchange does $1B annually, so you know we're trustworthy!"
- "Hey investors, look at the massive demand for our GPUs (driven by the company we invested $100B)!"
Its generating the facade of activity, the same.
You are right theres no public ledger for the wash trading, but the fact that the underlying real physical asset is NVIDIAs product, lends the same intentional activity: to leverage apparent markeet activity to inflate the value of assets.
The deal allows OpenAI to purchase up to 6GW of AMD GPUs, while AMD grants OpenAI warrants for up to 10% equity tied to performance milestones, creating a closed-loop of compute, equity, and potential self-funding hardware purchases. Circular.
From the announcement per se, AMD's stock rose to a level that effectively canceled out whatever liabilities they were committing to as part of the deal, so it was all gravy, despite it being a press release