[HN Gopher] Cloud Provider Gets $2.3B Loan Using Nvidia's H100 a...
___________________________________________________________________
Cloud Provider Gets $2.3B Loan Using Nvidia's H100 as Collateral
Author : belltaco
Score : 71 points
Date : 2023-08-04 19:43 UTC (3 hours ago)
(HTM) web link (www.anandtech.com)
(TXT) w3m dump (www.anandtech.com)
| comboy wrote:
| I can't find any info in the article but that seems like.. a lot
| of H100s.
| foota wrote:
| The street price is 235 an ounce.
| thewataccount wrote:
| The funny part to me is they'll likely use that money to buy more
| H100's.
|
| > Last month, Inflection AI built a supercomputer worth hundreds
| of millions of dollars powered by 22,000 NVIDIA H100 compute
| GPUs.
|
| What? InflectionAI has relatively little brand recognition, do I
| not know something about them, are they just the first in line,
| or is nvidia just selling this many cards in general? I can only
| imagine all the typical ones like lambda, AWS, openai, apple,
| <insert large tech company here> are buying even more?
|
| EDIT: Wait if the collateral is for a 2.3B USD loan - how many
| cards do they have?!
| multicast wrote:
| It really depends on the type of financial institution that has
| given the loan. A bank for this type of transaction is very
| unlikely nowadays, so I guess it is a private credit fund.
| Given that they have probably applied some sort of traditional
| Loan-to-value ratio, it's very likely that the $2.3 billion is
| only a portion of the total value. Meaning the cloud provider
| has received e.g. 50 or 80% of the total value of the H100's as
| a loan. It surely is not very much since electronics have a
| high depreciation rate from an accounting perspective (3-5
| years max).
| [deleted]
| neom wrote:
| Kinda how we built DigitalOcean in the early days, the software
| was venture funded but the HW was funded as lease lines and
| credit against the HW we owned originally + a decent business
| plan based on the growth. It's a good(/slightly scary) strategy!
| Highly recommend more folks look at credit facilities.
| jacquesm wrote:
| That works as long as you maintain that growth. Too long a bump
| and you're waiting tables ;) But at least that didn't happen to
| DO. Being create with financing is probably a very important
| component in starting companies that have a lot of capital
| expenses to make, and it is the kind of thing that your typical
| tech founder usually has little experience with.
| dylan604 wrote:
| >Highly recommend more folks look at credit facilities.
|
| Are you suggesting funding with lines of credit vs "free" money
| from VC which diminishes the founder's control?
| jacquesm wrote:
| VC money is _super_ expensive. Banks are the cheapest option,
| especially if you own property you can just use that that get
| a bunch of working capital. Any capital for equity should if
| you can swing it be done as convertible loans so that you at
| least have the option to pay it back if that is in your best
| interest. It also keeps the cap table clean and you (the
| founders) solidly in control until you decide to change that.
|
| I've seen more than one case where a company was looking to
| do a round but they had not even considered the option of
| taking out a bank loan against their inventory. Especially
| for short term liquidity that's much, much better than VCs
| buying stock.
| neom wrote:
| It's very different types of money. Both are dangerous but vc
| money is considerably less dangerous (imo). If you take
| someone like Fortress as your capital group (credit line)
| you're going to lose the company if you f up, period. With
| VC, you have more latitude to have a conversation. We ran a
| very difficult path to build DO, I'm sure a lot of people
| lost sleep many nights, but if you're very sure about the
| business, credit facilities can be helpful, just know they're
| not joke. Neither is better or worse than the other, they're
| different but both useful. My point was if you are sure about
| the business credit facilities can be really helpful and are
| under explored for many startups (granted HW is often a
| factor in credit)
| Animats wrote:
| It's a routine financial transaction. Often these are structured
| as leases, where the lender remains the owner. It's common for
| aircraft, locomotives, etc - things with long, predictable
| lifespans, insurable against damage.
|
| The problem for the lender is that it's a bet against progress in
| the field obsoleting the thing. If the user can cancel and send
| the thing back because there's a more cost-effective model, the
| lender has a problem. That mistake hurt Lloyds of London in the
| 1970s.[1]
|
| [1] https://www.nytimes.com/1979/07/30/archives/lloyds-
| insurers-...
| mediaman wrote:
| I don't know the details of this lease, but it is likely a
| capital lease, not an operating lease. The lessee will not have
| the option of returning it. It will be recognized as an asset
| on the lessee's balance sheet. The lessee backs the lease not
| just with the collateral, but with the full value of the
| capital structure up to any debt senior to it.
|
| It's a bet against progress in the field only to the extent
| that they depend on the collateral if the lessee fails. Lessors
| hate getting collateral back. So they've probably looked at the
| lessee's capital structure and decided that, along with
| whatever interest rate they're getting, it's a reasonably
| priced risk. They're likely mapped out their estimated risk of
| default by year along with a declining recovery value of the
| collateral by year.
| jes5199 wrote:
| how long do we expect these things to hold value?
| stefan_ wrote:
| Once they stop working for training they can still do inference
| for a long time.
| wmf wrote:
| Four years, maybe more. People aren't throwing away their A100s
| yet.
| belval wrote:
| Even the larger V100 instances are still heavily used at
| AWS/GCP/Azure. The reality is that demand does not disappear
| if there are no H100/A100, it just finds another way.
|
| There's also the fact that if you are not training LLM, you
| can get a better deal using some older hardware.
| H8crilA wrote:
| Possibly longer than some stocks against which rich people take
| loans. Much stupider things have happened in the credit market.
|
| Also, the Reuters article says that they have a depreciation
| schedule built into the contact. Compute hardware can
| depreciate pretty quickly, if I remember correctly major tech
| companies have around 3 years planned for the depreciation.
| dmoy wrote:
| > if I remember correctly major tech companies have around 3
| years planned for the depreciation.
|
| Historically yea, though now I think it's being stretched to
| 5+ years as they see hardware last longer in production (but
| you're atiop correct, it's very quickly relative to a lot of
| other loan collateral, still a short term deal even if it's 7
| years)
| TechBro8615 wrote:
| I expect they'll lose value in the step-function shape that's
| typical of technology, where each new generation decreases the
| value of the previous one. But that's fine, as long as each
| chip generates more revenue over its lifetime than it cost. And
| the lifetime can extend through multiple generations, as long
| as each successive generation is only a marginal improvement
| over its predecessor.
|
| Personally I think the bigger risk is software innovations
| making CPU training (and/or inference) sufficiently viable that
| it's cheaper to train models on a commodity CPU cluster than on
| some proportionally expensive GPU cluster. I don't know enough
| about the space to say whether that's likely, but it seems like
| a low risk, since pretty much any parallel algorithm will
| always be faster on GPU than CPU - it's just a question of the
| marginal benefits and cost (e.g. maybe it takes more CPU to
| train same model in same time, but cost of CPU is so much lower
| that it's worth buying more of them).
| ramesh31 wrote:
| Chips are the new oil and H100s are the finest sweet light crude
| on earth.
| throwing_away wrote:
| Are GPUs a security now?
| mk_stjames wrote:
| Why does it feel like this story will be depicted in a future
| Adam McKay film, and involve Steve Carell or Ryan Gosling on the
| phone, talking to a loan officer, maybe interposed with a
| cutscene of Selena Gomez explaining what the hell an Nvidia H100
| is to the audience?
| wmf wrote:
| Don't forget Martin Shkreli (played by himself) in a trenchcoat
| trying to buy H100s out of the back of a van.
| tmpz22 wrote:
| I don't - companies misallocating resources to chase fads most
| of which end up as mediocre product is nothing new nor is it
| tech industry specific.
| Havoc wrote:
| For how long? Loans tend to last longer than cutting edge gear
| mediaman wrote:
| Lease deals like this tend to be structured as an amortizing
| loan over 3-5 years. They also probably did not finance the
| entire value, but the entire value will be collateral. If they
| financed, say, 70%, then a couple years in the remaining
| exposure may be well under 50% of original price; four years
| in, they likely need only a low recovery to become whole.
| Havoc wrote:
| That's precisely my point - even very conservative financing
| you're looking at collateral value that falls off a cliff in
| what a year vs a 3-5 year loan.
|
| Worse the collateral side of the equation is currently in max
| AI hype bubble frenzy pricing while the loan is well what it
| says.
|
| Very much feel like we're getting half the
| story...specifically the part that makes for good PR "Look at
| us we have lots of H100s and they're really valuable".
| kev_dev wrote:
| They are using H100s as collateral for a loan to buy... more
| H100s. Sign of an AI bubble? Nvidia is the real winner here.
| CaptRon wrote:
| Seems like the start of a funny Matt Levine article in a few
| years.
| ramesh31 wrote:
| >They are using H100s as collateral for a loan to buy... more
| H100s. Sign of an AI bubble?
|
| Or signs of an exponentially accelerating technological
| singularity
| PartiallyTyped wrote:
| Somebody has to make the shovels, right?
| tester756 wrote:
| kinda TSMC / ASML
| ballenf wrote:
| Next week's news: Nvidia prohibiting collateral loan agreements
| as part of their partner agreements. The last thing they want is
| a glut of these hitting the market due to bankruptcies.
|
| But their sales team or other execs who have incentives to keep
| sales prices inflated for as long as possible will fight against
| such a move.
| mschuster91 wrote:
| Even if a few companies go bankrupt, the demand for AI training
| hardware is absurd and likely won't go down any time soon - and
| unlike all the shitcoins, there is no (viable) threat of ASICs
| outcompeting GPUs.
| ShrigmaMale wrote:
| surprised they couldn't get asset-backed financing for the new
| build. wonder if they just took a better rate this way. ceo says
| cheap way to access debt so i guess so
| vsareto wrote:
| This is sourced from a Reuters article but they link to an MSN
| page which hosts it, so here's the original, damnit:
|
| https://www.reuters.com/technology/coreweave-raises-23-billi...
___________________________________________________________________
(page generated 2023-08-04 23:01 UTC)