“There is no neocloud without it [Nvidia CEO] Jensen [Huang]”, says Saari. This makes neoclouds essentially an extension of Nvidia,” he says. And none of them make any money, so they have to take on debt to grow.
If we look at them as, metaphorically, Nvidia’s special purpose acquisition companies, it won’t really matter whether these companies are any good or whether they survive in the long run. Their task is to increase Nvidia’s sales. Even OpenAI, also an Nvidia investment, sort of falls into this category — because the massive data center expansion that OpenAI wants the government to support surely requires a huge number of Nvidia chips.
If you are old enough or have a certain disposition, you may think: Wait a minute, You’re not describing Enron? And in a way, yes! The whole Enron thing was like this special purpose vehicles about the extremely speculative valuations that were used to take on the debt, Luria notes. But Enron lied about what he was doing, and that is fraudulent and illegal. (Plus, other illegal things happened.) Nvidia’s relationship with CoreWeave is happening in plain sight. Like all relationships with other neocloud companies. It’s a bit like the company’s version of GameStop’s open pump and dump.
“This is not good or healthy behavior,” Luria says. “But it’s legal. Any investor can see it. Many just choose not to do it.”