Deep dive on Nvidia circular funding
by jeanloolz on 12/8/2025, 6:48:27 PM
https://philippeoger.com/pages/deep-dive-into-nvidias-virtuous-cycle
Comments
by: gchadwick
> However, Groq’s architecture relies on SRAM (Static RAM). Since SRAM is typically built in logic fabs (like TSMC) alongside the processors themselves, it theoretically shouldn't face the same supply chain crunch as HBM.<p>It's true SRAM comes with your logic, you get a TSMC N3 (or N6 or whatever) wafer, you got SRAM. Unfortunately SRAM just doesn't have the capacity you have to augment with DRAM which you see companies like D-Matrix and Cerebras doing. Perhaps you can use cheaper/more available LPDDR or GDDR (Nvidia have done this themselves with Rubin CPX) but that also has supply issues.<p>Note it's not really about parameter storage (which you can amortize over multiple users) it's KV cache storage which gets you and that scales with the user count.<p>Now Groq does appear to be going for a pure SRAM play but if the easily available pure SRAM thing comes at some multiple of the capital cost of the DRAM thing it's not a simple escape hatch from DRAM availability.
12/8/2025, 7:50:59 PM
by: throw234678
This post is written with its <i>intellectual fly</i> open. I'm not sure whether it was partly AI-generated, or whether the author has spent so much time ingesting AI-generated content that the tells have rubbed off, but this article has:<p>- Strange paragraph-lists with bolded first words. e.g. "The Cash Flow Mystery"<p>- The 'It's not just X; it's Y' meme: "Buying Groq wouldn't just [...], it could give them a chip that is actually [...]. It’s a supply chain hedge."<p>Tells like:<p>- "My personal read? NVIDIA is [...]"<p>- "[...]. Now I'm looking at Groq, [...]"<p>However, even if these parts were AI generated, it's simultaneously riddled with typos and weird phrases:<p>- "it looks like they are squeezing each other [sic] balls."<p>- Stylization of OpenAI as 'Openai'.<p>Not sure what to make of this low-quality prose.<p>Even if the conclusion is broadly correct, that doesn't mean the reasoning used to get there is consistent.<p>I do, at least, appreciate that the author was honest up-front with respect to use of Gemini and other AI tools.<p>Final grade: D+.
12/8/2025, 7:53:35 PM
by: tims33
The specifics of the article zero sense. Net Income and Operating Cash Flow are not the same thing so there is no mystery about whey they are different especially in a business with large Capex and long lead times.<p>NVIDIA's historic DSO figures have also ranged from 41 to 57 over the last 5 years, so again not that crazy.
12/8/2025, 8:39:17 PM
by: kart23
The critiques of 'circular funding' don't really make sense to me. If you invest 20 billion and you get back 20 billion, your profit is the same. Sure your revenues look higher but investors have access to all that information and should be taking that into account, just like all the other financial data.<p>Michael Burry is betting against AI growth translating into real profits as a whole, not the circular funding.
12/8/2025, 7:34:41 PM
by: wmf
<i>Since SRAM is typically built in logic fabs (like TSMC) alongside the processors themselves, it theoretically shouldn't face the same supply chain crunch as HBM.</i><p>DRAM and logic fabs are both sold out so replacing one with the other doesn't really help. And SRAM uses ~6x more silicon area than DRAM.<p>Groq may be undervalued but not for supply chain reasons.
12/8/2025, 8:23:18 PM
by: Havoc
Not a big fan of the circular observation. It's not the gotcha people seem to think.<p>If the baker sells bread to the butcher, and the butcher sells meat to the baker then they can still both go to bed with a belly full of sandwich (aka actual utility & substance).<p>Adding a third party to make it look more circle-y doesn't change that logic.<p>Round trip financing is mostly an issue if it is artificial (e.g. a circle of loans) and between affiliated parties, not when something of substance is delivered. Oracle is a business partner of nvidia but I'd wager they'll still kick up a fuss if they don't get their pallets of GB200s. They'll expect actual delivery...like you know...in a real sale.
12/8/2025, 8:40:13 PM
by: CobrastanJorji
Regardless of the content itself, using Nano Banana to illustrate OpenAI's financial bullshittery is some grade A snark.
12/8/2025, 8:12:10 PM
by: jmole
Isn't circular funding how the entire economy works?<p>I can see how you could make an argument that this particular ouroboros has an insufficient loop area to sustain itself, or more significantly, lacks connection to the rest of the economy, but money has to flow in circles/cycles or it doesn't work at all.
12/8/2025, 8:08:52 PM
by: markbao
AI-generated section “NVIDIA’s earnings” nerfed the credibility of this piece.
12/8/2025, 8:07:09 PM
by: cmiles8
The circular funding is concerning, but more concerning are suggestions that supply might be vastly exceeding demand. Not that people don’t want chips but that the chip production now exceeds the ability to power them up and use them. The shortage is power and racks in data centers ready to go. Folks are running numbers suggesting there’s a bunched chips now just sitting around.<p>That, combined with some cooling from an AI hype bubble burst (see separate articles about companies missing quota as folks aren’t buying as much AI as the hype hoped) and there’s a potential ugly future where the headline demand plummets in top of idle chips waiting to be powered on. Suddenly the market is flooded with chips nobody wants.
12/8/2025, 8:01:13 PM
by: IshKebab
> However, Groq’s architecture relies on SRAM (Static RAM). Since SRAM is typically built in logic fabs (like TSMC) alongside the processors themselves, it theoretically shouldn't face the same supply chain crunch as HBM. > > Looking at all those pieces, I feel Oracle should seriously look into buying Groq.<p>I don't see why. Graphcore bet on SRAM and that backfired because unless you go for insane wafer scale integration like Cerebras, you don't remotely get enough memory for modern LLMs. Graphcore's chip only got to 900MB (which is both a crazy amount and not remotely enough). They've pivoted to DRAM.<p>You could make an argument for buying Cerebras I guess, but even at 3x the price, DRAM is just so much more cost effective than SRAM I don't see how it can make any sense for LLMs.
12/8/2025, 8:10:02 PM
by: Morizero
I appreciate the disclosures about Gemeni and Nano Banana, but does that start to feel a little like a conflict of interest or something similar in an article discussing their competition?
12/8/2025, 7:19:58 PM
by: strangescript
Its so wild to me that people that should know better pretend that this kind of stuff doesn't happen in every industry.
12/8/2025, 7:41:16 PM
by: doctorpangloss
> quietly arming themselves for a breakout.<p>If I wanted to read Gemini's opinion about this issue with the voice of a crank technical analysis, I would
12/8/2025, 7:47:12 PM
by: blindriver
This is what happens when highly confident uneducated people read slop from other uneducated people with an agenda (Twitter, Burry et al) and then regurgitate more slop.<p>There is no circular funding. There’s certainly circular speculation that is driving up the prices but the revenues are all accounted.<p>The DSO change is meaningless if you understand accounting.<p>The inventory building up is the cost of materials and incomplete inventory. It’s not chips sitting around waiting to be deployed.<p>> holding ~120 days of inventory seems like a huge capital drag to me.<p>Yeah I guess this guy who knows nothing about running a business like Nvidia is allowed to make confident statements like this despite no education or experience.<p>This article is garbage and he wasted his 48 hrs investigating the same things I read in another worthless tweet several weeks ago.
12/8/2025, 8:27:27 PM
by: nelox
[flagged]
12/8/2025, 7:59:27 PM
by: fwip
<p><pre><code> - **The Cash Flow Mystery**: ... - **The Inventory Balloon**: ... - **The "Paper" Chase**: ... </code></pre> More AI slop.
12/8/2025, 7:48:05 PM
by: givemeethekeys
Isn't news of Bury or Pelosi, or anyone else's investments usually 3 months old?
12/8/2025, 7:42:24 PM
by: calflegal
My god, this article and half the comments here seem like they came from AI.<p>Dead internet much?
12/8/2025, 8:10:47 PM
by: tzury
The Burry short is just one data point, but the "facts we know" are piling up fast.<p>Here is a possible roadmap for the coming correction:<p>1. The Timeline: We are looking at a winter. A very dark and cold winter. Whether it hits before Christmas or mid-Q1 is a rounding error; the gap between valuations and fundamentals has widened enough to be physically uncomfortable.<p>The Burry thesis—focused on depreciation schedules and circular revenue—is likely just the mechanical trigger for a sentiment cascade.<p>2. The Big Players:<p>Google: Likely takes the smallest hit. A merger between DeepMind and Anthropic is not far-fetched (unless Satya goes all the way).<p>By consolidating the most capable models under one roof, Google insulates itself from the hardware crash better than anyone else.<p>OpenAI: They look "half naked." It is becoming impossible to ignore the leadership vacuum. It’s hard to find people who’ve worked closely with Altman who speak well of his integrity, and the exits of Sutskever, Schulman, and others tell the real story.<p>For a company at that valuation, leadership credibility isn’t a soft factor—it’s a structural risk.<p>3. The "Pre-Product" Unicorns: We are going to see a reality check for the ex-OpenAI, pre-product, multi-billion valuation labs like SSI and Thinking Machines.<p>These are prime candidates for "acquihres" once capital tightens. They are built on assumptions of infinite capital availability that are about to evaporate.<p>4. The Downstream Impact:<p>The second and third tier—specifically recent YC batches built on API wrappers and hype—will suffer the most from this catastrophic twister.<p>When the tide goes out, the "Yes" men who got carried away by the wave will be shouting the loudest, pretending they saw it coming all along
12/8/2025, 7:54:14 PM