Gather round for some Big Short, Margin Call level shit…
The goal of this post isn’t to accuse any financial firm or Nvidia of breaking any laws because we all know our existing laws let the big dogs do whatever the fuck they want with zero consequences. It’s to start figuring out whether we’re really on the precipice of the next AI revolution (probably not given how a cone can stop a Cruise car from moving and Elon’s FSD ran a red light on stream), or the next mania induced bubble.
- 2001 .com bubble
- 2008 MBS bubble
- 2017 crypto bubble
- 2021 SPAC/NFT trash bubble
- 2023 AI AI AI AI AI AI AI AI bubble????
If you’ve read this far, then have I got a timeline for you….
Magnetard Capital is a hedge fund who helped exacerbate the 2008 financial crisis by putting together extremely toxic subprime mortgages and then betting against them via CDOs. They’re known within wall street as one of the more deplorable hedge funds to exist. And it makes some sense, as the founder and CEO of Magnetard Capital, Alec Litowitz, comes from a hedge fund we all know and love, Ken Griffin’s Citadel LLC.
- The Magnetar Trade: How One Hedge Fund Helped Keep the Bubble Going
- A Fund Behind Astronomical Losses
Fine, but what does this have to do with Nvidia and CoreWeave?
CoreWeave was originally called Hudson Ridge Asset Management and founded in 2012 by three former natural gas futures traders (Enron vibes anyone?) turned crypto bros who renamed their company The Atlantic Crypto Corporation in 2017 to capitalize on the burgeoning retail crypto bubble.
After riding that fad into the ground, they pivoted from ETH mining and renamed themselves CoreWeave on October 28 2021.
Two weeks after CoreWeave was founded, Magnetard Capital invests $50 million into CoreWeave despite the two week old company having no patents, products, or anything of substance. That same day, Nvidia announces CoreWeave is now an Nvidia Elite Partner for Compute. Strange.
Nov 2022 – ChatGPT becomes the new fad everyone can’t stop talking about, especially your creepy bald uncle who wants to know if “the AI” can write erotic novellas, hypothetically of course…
Dec 2022 – CoreWeave secures another $100 million from Magnetard Capital. Again, CoreWeave has no products, patents, or services.
April 2023 – CoreWeave gets another $221 million led by Magnetard Capital and Nvidia as a secondary investor.
May 2023 – CoreWeave secures $200 million in a series B extension, bringing the total Magnetard Capital has invested in CoreWeave to nearly half a billion dollars.
August 3 2023 – CoreWeave announces they’ve raised 2.3 billion in debt from Magnetard Capital, Blackstone, BlackRock, and some other shady financial firms, all collateralized by Nvidia H100 chips (meaning they bought 2.3 billion dollars worth of H100 chips prior to this debt agreement, presumably before Nvidia’s Q2 closed at the end of July 2023).
August 23 2023 – Nvidia beats earnings expectations, and specifically beats their datacenter guide by exactly 2.3 billion dollars. Coincidence I guess.
The bulls will say….dEMaNd iS oFf tHe ChArTs
If everyone can’t get enough chips and Nvidia can’t make them fast enough, why are they funneling sales of a chip no one can get their hands on through a brand new company run by former nat gas and crypto traders that have no experience with cloud, deep learning, or AI, who are backed by one of the shadiest hedge funds of all time?
And if demand is so strong, why is Nvidia’s inventory up 98% YOY and at 4 year record highs?
Nvidia’s existing inventory
This isn’t Nvidia’s stock price, it’s their current inventory levels
In summary, what all these shady entities including Nvidia are doing may not be illegal, but it brings up some very valid questions about how strong demand actually is beyond the mania driven headlines.
And if Nvidia hadn’t pulled a hat trick with that 2.3 billion pull forward funneled through CoreWeave and missed guidance, many hedge funds and the broader market would risk having their AI bubble pop too soon. Because get this…
August 30, 2023 – Nvidia-Backed CoreWeave Seeks Stake Sale at Up to $8 Billion Valuation
All credit goes to this guy – twitter.com/JG_Nuke aka Nobody Special who is still unraveling this entire saga as we speak.