Monologue: NVIDIA's No IT Loads Refused Cash Dump

**Ed Zitron** (0:05)
Hello and welcome to this week's Better Offline monologue, I'm your host Ed Zitron.
I know some of you are going to say, Ed, why are we hearing a monologue on a Wednesday? I don't like change, I'm screaming, I'm screaming and crying. And the answer is, we're going to have a full in-studio episode running Friday with Wednesday's Chloe Radcliffe and Ed Ongreso Jr. They're back folks. And those of you in the New York Metro should also get tickets to see Chloe's new stage show Cheat at Joe's Pub. Link will be in the episode notes. It's actually fantastic. It's genuinely one of the best things I've ever seen, and I generally don't like going outside. Anyway, let's talk about this fucking Nvidia deal. Earlier in the week, various media outlets reported that Nvidia was lining up $500 billion as well as in financing for AI infrastructure in partnership with Apollo, Blackstone, BlackRock, Brookfield Asset Management, Goldman Sachs, KKR, Cobra Command, Gargamel, Gruen the Minions, Mortimer MacMeyer from Commander Keen, and the ghosts of Margaret Thatcher and Ronald Reagan. Okay, well, technically partnership and lined up don't really reflect the truth of the matter, and neither does $500 billion for that matter. What actually happened was Nvidia signed memorandums of understanding, which are not worth the paper they're printed on, with six asset managers to maybe build some datacenters at some point using money they might raise. The Wall Street Journal also reports, in a paragraph that was since removed from the story, that the financing would involve different vehicles rather than one large collaboration, meaning that they'll probably just raise a bunch of datacenter deals separately, in exactly the same way they've already been doing. And if they're already funded across the board, they're in CoreWeave, they're in every goddamn deal. Every single person I've just named, other than obviously the joke ones, is involved with CoreWeave or an AI datacenter of some sort. Jesus Christ. Not in any of the stories either.
In any case, all of this is entirely theoretical, because a memorandum of understanding from Nvidia is worthless. In September last year, Nvidia CEO Jensen Huang, along with OpenAI executives, Clammy Sam Altman and Greg Brockman, went on CNBC to talk about how it was investing a hundred billion dollars in OpenAI to build 10 gigawatts of compute capacity, and that said deal was monumental in size, even though the deal was based on a memorandum of understanding. In the end, Huang would claim to Taiwanese journalists that this was, and I quote, never a commitment, and that Nvidia was invited to invest $100 billion, and they were happy and honored as a result. In the end, Nvidia invested $30 billion in OpenAI six months after the announcement of the original deal, and OpenAI built zero gigawatts of data center capacity as a result. Poverty is an effect, you know, just these things happen, things move crazy. You know, $70 billion didn't happen, 10 gigawatts of capacity didn't get built, nothing happened, just completely fucking false. They did an interview on CNBC just like they did with this deal. I feel like I'm going insane.
Anyway, on Monday night, Huang went on Twitter and delivered a seemingly AI-written screed, or maybe he's just a shitty writer, about this theoretical partnership, adding that Nvidia would, and I quote, provide a residual value support mechanism for up to 25% of an opportunity, assessed carefully on a project by project basis. And if you're wondering what that means, that makes two of us. That was very clearly Collette Cress, the CFO, and the legal counsel just being like Jensen, you will run these. You will run this goddamn sentence. I will. I'll get the club, Jensen. Anyway, if I had to guess, that 25% refers to Nvidia guaranteeing a certain amount of compute revenue for the company building the project, as in like they will guarantee that, say, if OpenAI can't afford to pay, they'll cover the costs up to 25%, which would in turn allow this developer to raise billions of dollars to buy Nvidia GPUs. This is actually very common. It's how Coreweaves raised a bunch of debt. They go to the various financiers and they say, hey, look, I got a contract. I got a contract from a customer. Sometimes that customer is Nvidia, by the way. And the bankers go, oh shit, you got a guaranteed contract, huh? I'll give you the money for this. Yeah, you look like you're running out of money and we're going to need to do 9% interest, but fuck me up, grandpa.
I should also add that none of this is actually real until actual contracts are signed and actual money is raised and that Jensen Huang's word is effectively worthless at this point. In the Twitter post, Huang also added two questions to, I imagine, alleviate concerns. He responded to the question of whether this was circular financing by saying that this initiative was built to address that concern, bringing independent long-term institutional capital into the AI infrastructure market, before adding that the demand is real and it comes from Frontier AI Labs, followed by a series of other companies that do not have significant demand for AI compute, ending by saying that this was the beginning of an open capital market for AI infrastructure, which means nothing.