Well, it seems like buying NVIDIA’s AI chips could earn even more money in loans, as a new financial model now allows AI startups to put their GPUs as collateral.

Buy NVIDIA AI Chips, Use Them to Get a Loan, Then Buy More AI Chips; Well, Seems Like An Interesting Model

The AI bandwagon is definitely up and running, and in all the frenzy, companies are apparently spending billions on hardware and software to cater to the demand coming from the market. With finances getting suck up in the hype, it seems like a new window has opened up for AI companies to apparently get “billions of dollars” by putting their AI accelerators as a collateral for loans. In a report by The Information, a London-based cloud startup Fluidstack has managed to get over $10 billion in funding from financial institutes like Macquarie, showing that NVIDIA’s AI GPUs have now real value in the financial markets.

According to the report, this model was initially adopted by Coreweave, a company that NVIDIA backs in investments and hardware. In simple terms, Coreweave got chips from NVIDIA like the H100 AI GPUs, which were used to secure loans of up to $9.9 billion through GPU-backed financing. With the funding, Coreweave might have decided to buy new accelerators, and the bandwagon keeps on going in circles. Interestingly, some reports claimed that AI GPUs are kept as collateral under some sort of “lock boxes”, where they are held as assets until debt payment is completed.

NVIDIA has sold hundreds of billions of dollars worth of AI chips to the market, and despite that, they remain scarce. Their use case, followed by how difficult they are to get, might be one of the ways financial institutions see AI GPUs as the right thing to put collateral in loans. However, there’s a risk with this economic model, which is the depreciation of AI accelerators, following NVIDIA’s new releases. The market moves towards a newer variant, and the older ones will drop quickly in pricing, which is something lenders see as a risky factor.

Another interesting thing is that if startups fail to keep up with their debt payments, the “collateral” AI chips might get flooded into the markets, which would be a tough situation for NVIDIA and supply chain partners to deal with. Seeing GPUs as security assets is indeed a controversial move, but given how important AI computing has become in the modern-day world, it might be a worthwhile venture for lending institutions. But before I complete, remind me what MicroStrategy (MSTR) does in the comment section below.

https://wccftech.com/nvidia-ai-chips-are-reportedly-being-used-as-collateral-for-loans/amp/