Nvidia bets hard on its customers
Gold rush fables only apply if the gold is going to run out
The Wall Street Journal reported today that Nvidia, the world’s leading AI chipmaker and most valuable company, is in talks to guarantee $250 billion in financing to allow OpenAI to lease a 10-gigawatt data center project.
Yes, big numbers are hard to wrap our heads around. I assure you that these are really big numbers. I don’t think I’m taking any reputational risk in claiming that these numbers will fuel the talk of “circular financing” popular with those who argue that AI is a bubble that may already be bursting.
Among promoters of such narratives, “circular financing” is used to suggest that the AI industry is a house of cards. This tends to smuggle an invalid argument in with a valid one.
The valid argument is about brittleness: If AI’s investment is coming largely from its own suppliers, then losses by AI companies could ripple up and back down the supply chain, triggering a chain reaction of defaults and credit squeezes.
The invalid argument, usually left implied, is about desperation: It says that AI companies are funding each other because no one else will — because everyone else thinks AI is snake oil and wants no part of it. The desperation argument is demonstrably false. Investors have been crawling all over each other to gain exposure to Anthropic, OpenAI, SpaceX, and others. SpaceX’s IPO had a sizeable pop before coming back down to Earth, and is now trading very close to where it opened.
Nvidia is often described as selling the “picks and shovels” of the AI rush. In the traditional gold rush narrative, people who grub for ore are fools, and the real money is in mining the foolishness. That story is largely folklore; many of the California miners’ suppliers went bust, too. But regardless, the applicability of the analogy hinges on whether the AI gold is going to run out and leave investors empty-handed.
Nvidia obviously doesn’t think so. The shovel-merchant is effectively “grubstaking” now — the term for provisioning miners on credit, in the form of a share of the treasure. Bloomberg reports today that the company is investing $5 billion in SSI. That’s Safe Superintelligence, the secretive startup founded by Ilya Sutskever, one of the three “godfathers of AI.” Sutskever was OpenAI’s chief researcher before leaving in 2024 following his failed attempt to oust Sam Altman as CEO. That $5 billion is tied to Nvidia chips expected to 10x SSI’s compute within a year. The company has yet to release or even announce any products.
Spreading investment around on long-shot bets like this is consistent with a belief that the gold is in no danger of running out, even if it’s hard to guess who will find it.
I don’t think the gold is going to run out, either. Not if companies are allowed to keep mining in the direction of superintelligence. I think a lot of the picks and shovels will change hands, as we’ve seen with SpaceX renting huge data centers to Anthropic. But I expect the veins to keep getting richer, and hotter, right up until the moment someone delves too greedily, and too deep.
The analyses and opinions expressed on AI StopWatch reflect the views of the individual contributors and the sources they cover, and should not be taken as official positions of the Machine Intelligence Research Institute.