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Comment by AnimalMuppet | Hacker News Reader

"I give you $30 billion if you use it to buy $30 billion of stuff from me" doesn't sound like a very good investment. Is Nvidia expecting more back than it puts in? Enough more to make the deal profitable?

Or is it just to keep Nvidia from crashing?

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"I give you 30B$ worth of hardware that costs me <10B$ to make in exchange for 30B$ worth of shares in your company" would be a more accurate description.

How does this work with private companies? It feels like Nvidia could find that the market does not value OpenAI stock the same way they did.

Public or private, there's never a guarantee of being able to sell back for some nominal price.

Well, I won't pretend I know the answer :) . But I assume that a) they are partially betting on making a normal return on investment (i.e. OAI not crashing), b) they profit from running a huge expense/revenue cycle (a company making say a million of profit and having a billion revenue is favored better than the same but with only ten million revenue), and c) even if all goes wrong, it is still better to get back most of the investment even if not everything and zero profit, compared to a possibility of just losing it all like SoftBank or other investors.

In the end it's exchanging GPUs for OpenAI shares. It's not a non-trade, and in the current market Nvidia could really sell the stuff for cash. The marginal cost is very much sharply positive.

$30B in sales is worth more than $30B in stock appreciation...

I'd say the latter. Right now AI is Nvidia's biggest consumers. If any big AI company crashes, they'll lose a lot of money

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