[ElProlactin]

> Whether CoreWeave actually bought chips it doesn't need is speculative; whether they are incentivized to do so is not. That is clearly the case: if you are guaranteed that any excess capacity will be bought, a rational actor will buy more than they need, as there is no risk for over-buying, but there is risk in being caught short. That isn't cynical, it's simple econ 101.

There's a problem here: you haven't actually quantified how much CoreWeave is spending versus the value of the backstop. You seem to be suggesting that for every dollar CoreWeave spends on Nvidia chips, it's getting a dollar in backstop. But that's not how it works.

CoreWeave buys chips from Nvidia; Nvidia has agreed to buy up to $6.3 billion in unused compute capacity through 2032. It's not buying back the chips, etc.

CoreWeave has raised way more debt (over $35 billion) to build out compute than what Nvidia has backstopped (up to $6.3 billion). In other words, CoreWeave is spending a ton to buy chips, build datacenters, buy electricity, etc. and Nvidia's backstop, while important, doesn't come close to backstopping all the investment CoreWeave is making to acquire its compute capacity.

If demand for compute dries up, CoreWeave and its lenders are going to be on the hook for way, way more than Nvidia is.

> As noted earlier, the $6.3B is a floor, not a ceiling.

You keep repeating this but it's factually incorrect. The $6.3 billion is the maximum.

https://finance.yahoo.com/news/coreweaves-6-3-billion-backst...

As I've noted, $6.3 billion works out to a few days' revenue for Nvidia.

> Maybe. But the whole point of this discussion is trying to answer the question, "How much of Nvidia's revenue is real?"

This is such a strange question.

Nvidia reported revenue of ~$215 billion for FY 2026, and ~$96 billion in free cash flow.

I don't know how to put it more simply: this is real money. And gobs of it. It's not made up.

The question you seem to really be asking is: is the demand for chips that is driving this revenue sustainable, or will it collapse, leading to a massive rapid drop in revenue? That's a completely different question but just FYI: Nvidia reported $81.6 billion in Q1 FY 2027 revenue so...

[vannevar]

>There's a problem here: you haven't actually quantified how much CoreWeave is spending versus the value of the backstop. You seem to be suggesting that for every dollar CoreWeave spends on Nvidia chips, it's getting a dollar in backstop.

I'm suggesting nothing of the kind. Nvidia is essentially guaranteeing CoreWeaves return on the chip investment. If someone offered you that deal, regardless of what the investment was, you'd buy as much as you possibly could.

>If demand for compute dries up, CoreWeave and its lenders are going to be on the hook for way, way more than Nvidia is.

True, but irrelevant. The return on investment incentive is independent of how much other debt you have, you'd still buy every unit you could.

>>But the whole point of this discussion is trying to answer the question, "How much of Nvidia's revenue is real?" >This is such a strange question.

Yet it's the actual question being discussed in the article, and not whether the arrangements are GAAP-compliant. Saying the revenue is real, and that there are "gobs" of it, doesn't make it so. For the record, I'm sure much of it is real. But I'm equally sure that much of the demand is artificial, driven by the business practices we're talking about. I think the root of the problem is that you sincerely believe that if revenue is accounted for in a GAAP-compliant way, it must be real, organic growth driven by real demand. By that standard, you can say that Beanie Baby demand was "real". But it wasn't tied into any underlying economic utility, it was a speculative bubble. So is the AI infrastructure market, just embedded in a much more complex system of deals, as we've been discussing.

>The question you seem to really be asking is: is the demand for chips that is driving this revenue sustainable, or will it collapse, leading to a massive rapid drop in revenue?

Yes, this also is the question really being asked in the article. Among the factors to take into account when judging sustainability are whether the sales are for cash or credit, and whether those sales are being incentivized extrinsically (like, say, guaranteeing ROI).

[ElProlactin]

> Nvidia is essentially guaranteeing CoreWeaves return on the chip investment.

You cannot say that Nvidia is guaranteeing a return on investment for CoreWeave without showing the actual math for a positive ROI.

CoreWeave has over $35 billion in debt, most of which has been used to build out datacenters. Nvidia's backstop is capped at $6.3 billion, and only through 2032.

You need a new theory here.

> Saying the revenue is real, and that there are "gobs" of it, doesn't make it so.

I'm really sorry, but with all due respect, this is getting into sillyland. Q1 2027 revenue of $81.6 billion is not a made up number. The $58.2 billion in net earnings is not a made up number. The $20 billion Nvidia returned to shareholders via share repurchases and dividends is not a made up number. The $80 billion the company added to its share repurchase program is not a made up number. The $50+ billion in cash and short-term investments on the balance sheet is not a made up number.

If every dollar in was being used to drive a dollar of new demand, Nvidia's financials could not look like this.

Now is there circularity in the AI market? Yes. Are there legitimate reasons to pay attention to it and be concerned? I think "yes" is a reasonable answer. But you cannot claim this is all "fake" and expect people to take you seriously because none of the financials supports it.

[vannevar]

>Nvidia's backstop is capped at $6.3 billion...

You keep saying this. That is not what the article says. It says the backstop is currently valued at $6.3B. That is not the cap.

>Q1 2027 revenue of $81.6 billion is not a made up number.

No one is saying it's a made up number. If you want to argue, at least read the comment and address the actual argument being made, and not a straw man.

>If every dollar in was being used to drive a dollar of new demand, Nvidia's financials could not look like this.

No one is saying Nvidia was spending a dollar for every dollar. It doesn't have to in order for the demand to be manufactured.

>But you cannot claim this is all "fake"...

Nowhere in this thread did I say it was all fake. Quite the opposite, every bubble has to have a core of reality to be sustainable.

You keep insisting that any revenue booked and reported must be real. So answer me this: if I take a GPU order from an insolvent individual for $100M, can I book that $100M as revenue and be GAAP-compliant? Is it real? What if I don't know that they're insolvent? What if I guarantee them ROI of $10M/year on their purchase so they can get a loan and pay me the cash? Still all GAAP-compliant? Still all real? And keep in mind this isn't a binary question---some of the demand can be real and some manufactured. Maybe my customer had $20M, and ordered $100M since I was guaranteeing the ROI. These are the reasons I am "concerned", as you put it. And as you say, those concerns are reasonable.

[ElProlactin]

> You keep saying this. That is not what the article says. It says the backstop is currently valued at $6.3B. That is not the cap.

We don't know what the maximum is because some of the terms are confidential. But if you're going to talk about this agreement so confidently, you should read the actual MSA:

https://www.sec.gov/Archives/edgar/data/1769628/000114036125...

The irony of this is that there are a number of scenarios under which Nvidia can legally terminate the agreement and most of them are precisely the kind of scenarios that would exist if CoreWeave came under significant financial distress. So contractually, the backstop isn't ironclad at all and worth far less to CoreWeave as you seem to believe.

Please, if you're going to make hyberbolic claims about what's going on, at least take the time to read what has been filed with the SEC. The picture is not as black and white as you make it.

> No one is saying Nvidia was spending a dollar for every dollar. It doesn't have to in order for the demand to be manufactured.

So have you quantified how much money Nvidia has to spend to generate a dollar of artificial demand?

If you're going to imply that CoreWeave was induced to take on tens of billions of dollars of debt to buy chips so it could have more compute capacity than it actually believes it needs with a $6.3 billion backstop that could disappear if it came under financial distress, please walk through the math.

> So answer me this: if I take a GPU order from an insolvent individual for $100M, can I book that $100M as revenue and be GAAP-compliant? Is it real?

No, under ASC 606 you cannot recognize revenue unless it's "probable" that you'll collect substantially all of the consideration due. And revenue would not be recognized until title to the assets being sold was actually transferred; a purchase order with nothing shipped is a backlog.

Before you ask these questions, why don't you do some research? These are not complicated accounting questions.

> What if I don't know that they're insolvent?

CoreWeave is publicly traded. Feel free to evaluate the financials and explain how the company is insolvent.

Stockholder equity is positive to the tune of nearly $5 billion, so its assets exceed its liabilities. And it generated nearly $3 billion in net cash in Q1 and is currently servicing its debt obligations. It even added an $8.5 billion non-recourse debt facility and was upgraded to positive from stable by S&P.

You don't get those types of debt facilities and S&P upgrades if you're insolvent. And ironically, insolvency is one of the potential triggers for the Nvidia backstop to go away.

A smarter discussion would be around CoreWeave's leverage and what happens if the AI demand dries up. That would be infinitely more useful than trying to make arguments that you haven't even researched.

> What if I guarantee them ROI of $10M/year on their purchase so they can get a loan and pay me the cash?

You haven't actually demonstrated that Nvidia has guaranteed CoreWeave a positive return on its investment. Once again, the $6.3 billion backstop is nowhere near the amount of money CoreWeave has spent building out capacity, which is tens of billions of dollars.

[vannevar]

>We don't know what the maximum is because some of the terms are confidential.

So we agree on something: the $6.3B is not the cap: we don't actually know what the cap is. (And for the record, I never spoke confidently about the agreement, I spoke confidently about what was stated in the article.) The SLA you linked is the operating agreement that is effective once the revenue guarantee comes into effect, it is not the agreement that guarantees the revenue. Insolvency is a canard: the whole point, from CoreWeave's perspective, is that the guarantee helps insure that it won't go insolvent if demand doesn't materialize. It can essentially pass the loss back to Nvidia. That's also why you indicated that it makes the deal more attractive to third-party lenders, correct?

>So have you quantified how much money Nvidia has to spend to generate a dollar of artificial demand?

No, because the precise amount is irrelevant. What matters is that the chip demand is induced, not organic.

>CoreWeave is publicly traded. Feel free to evaluate the financials and explain how the company is insolvent.

I did not state that CoreWeave was insolvent. I was pointing out a flaw in your apparent belief that reported, GAAP-compliant revenue is unimpeachable. At least now, you're asking the right questions.

>A smarter discussion would be around CoreWeave's leverage and what happens if the AI demand dries up.

That is the discussion I have been trying to have. Nvidia's demand-goosing is only one piece of a much larger circular system. One way that demand would appear to dry up is that it was never as rapidly growing as these deals assume it is. Once everyone in the chain buys into an assumption of growth, it can become a self-fulfulling prophecy, at least until reality becomes unavoidable. Right now, the assumptions are not really about AI demand, they are about data center demand. That's where the money is being spent, and that's where the circularity is appearing. We are in a regime where companies are richly rewarded whenever they participate in a data center deal, because "everyone knows, AI is going to be huge." There is a good discussion of how this is happening in https://www.groundbrkr.com/p/the-second-derivative-why-no-on... (see section III, "the AI Boom is a Credit-Driven Real Estate Cycle"). The gist of the article is that actual AI demand doesn't have to "dry up" for the system to collapse, it only has to accelerate at a slower rate than the assumptions made to support the data center deals.

>You haven't actually demonstrated that Nvidia has guaranteed CoreWeave a positive return on its investment.

You're misreading the meaning of the term "investment" here; only the ROI on the GPU purchase is relevant with respect to Nvidia, not any pre-existing 3rd party debt. I'm not saying Nvidia is guaranteeing CoreWeave's net profit as a business, only the marginal ROI it expects from the chips. Which still means that it is incentivized to buy to whatever the limit is of the guarantee, independent of organic demand. And remember, real demand doesn't have to decline, it only has to slow its acceleration. Goosing demand as Nvidia has done is clearly risky in that environment. And it also raises the question, why they had to do it at all if demand is so robust?