this post was submitted on 02 Dec 2025
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ELI5?
If I gave you $5 and then you gave it to someone else and then they gave it back to me we've done nothing but can call it $15 in business transactions.
Nvidia invests in company.... Company buys Nvidia items.... Nvidia stock goes up.... Nvidia has new pretend money to invest into another company....
And this is news to people?
Apparently so.
Question is: which of those is truly the best short play?
Only winning play is to not.
Why would nvidia have new money to invest when its stock goes up? That's not how the stock market works, you buy stock from other investors, not the company. Unless they finance all their investments with debt and use their higher valuation to get easier access to that financing. Which seems unlikely.
Don't get me wrong, I 100% think AI is a crap bubble, but I don't think you understood how this scam works.
NVIDIA sells GPUs to Oracle. Oracle sells GPU time to openai.
When time comes to pay the bills, openai doesn't have the money to pay Oracle who then doesn't have money to pay NVIDIA. So, Oracle gives stock to NVIDIA, and openai also gives stock to NVIDIA.
NVIDIA doesn't care if both go broke because now a gpu is worth a lot more, and in the books they're selling a lot more GPUs each for a lot more money. So NVIDIA stock goes through the roof even if they ran out of cash and got into ridiculous debt.
Shareholders have a ridiculous profit, NVIDIA directors get a massive bonus and NVIDIA CEO gets famous.
Why is it a problem? Because nobody has cash and this can't go on forever without some massive bankruptcies. I'm sceptical anyone is paying their power bills or servicing bank loans, so these may get dragged into the mud too.
the power bill seems to be placed on customers of the electric companies
Wouldn't NVIDIA care? They now own part of the company in exchange for that hardware?
If they go bankrupt, nvidia loses their stake in a company, and it all falls apart. GPUs won't stay this expensive if this implodes.
OpenAI though, can only go on for as long as their venture capitalists are willing to support it.
I'm not convinced the current LLM architecture can ever make an AGI, but it a can be useful and be made more useful. There could come a point where it's usefulness and it's short comings reach a profitable point that people will accept.
What could also help is nvidia being able to come out with more power efficient chips as well. It could go a long way to solving at least one of the problem.
The point is that major shareholder will try to hide insider knowledge to sell their stock before a big crash.
They pump the stock value as much as possible and sell it before it crashes. They make a shit ton of money and some suckers are left holding the bag.
Ah, yes those people definitely don't care, they'll make their money either way.
I think your question comes from thinking that anybody involved in this grift cares about anything other than short-term results. They would sell both their own kidneys as long as they only had to deliver after the next quarterly earnings report.
Because higher stock value means more collateral for debt.
You'd be surprised on how much debt is used in even small companies.
I'm aware, usually investments are not financed (primarily) with debt though.
Having the capabilities to take on debt helps to garner investments.
You can do a joint venture, take on a bit of debt but get more money of it.
And we've seen many mega corpos finance their venture throught debt (see Uber business model).
So I'd say that it was true in the past, but corpos are getting bolder.
Companies issue new stock to raise capital all the time.
Yea, except Nvidia didn't.
The company can issue more stock, not just use debt for its financing. And the value of the new stock is strongly influenced by the market price of the stock that has already been issued.
Nvidia's outstanding shares have declined continuously since 2017.
That's why transactions are defined as the exchange of something of value. In most legal systems, if you're caught swapping phony transactions like that, you can be prosecuted for fraud.
I think I understand. Can... Can I have the $5 now please?
300% profit! Where's my bonus!
You are allowed to take an extra 15-minute break.
But it has to be used this week. And during quiet times. And not within an hour of any other break. Or the start and end of your work hours. And not on any day that ends in Y.
I think this snippet get the gist across:
I haven't read the article, but I have read previous accusations of the same thing, so I assume it's the same.
Basically, the new AI companies are all losing money, but they are all investing big money in each other which makes it look like the industry is doing well.
"Every public company now faces machine-speed scrutiny of accounting practices. Anomalies that might have persisted for quarters until human analysts identified patterns now trigger immediate algorithmic responses."