$NVIDIA(NVDA)$ Some critics call Nvidia's plan to finance the AI buildout circular: help customers finance GPUs, then sell them Nvidia GPUs.

David Sacks argues that misses what Jensen Huang is actually building, and why he thinks it's brilliant:

"Let me tell you what's so brilliant about what Jensen did here. The numbers are getting so big that the TAM is getting constrained by the ability to finance this buildout. And what he's doing is alleviating that finance constraint so that he can grow as big as the TAM actually is.

Just to take one example. Elon wants to add somewhere around six to eight gigawatts next year. We know that would cost three to four hundred billion of capex. The company just raised a hundred billion in its equity and debt offerings. So obviously they'd have to go finance the rest somehow. And the simplest way would be seller financing from Nvidia, especially given the payback period could be as quick as one year.

So now Jensen is creating the line of credit, using these big banks, using these big private equity shops, and he's making that available to all these downstream purchasers.

I don't think it's circular. This is not a circular situation like Gurley's worried about. This is Wall Street banks and private equity firms providing financing based on the expected cash flows that will be delivered from these GPUs."

Gavin Baker: "In some ways, Nvidia is kind of becoming the central bank of AI. The Federal Reserve of AI.

And in the same way a lot of monetary policy works through private banks, here you have private markets charging fees, underwriting these deals, and Nvidia helping to facilitate that. So I don't think it's really circular financing."

Sacks: "For that to work, Nvidia has to standardize. They have to create reference designs so it's standardized enough for these Wall Street guys to package it up and securitize it, turn it into securities. That's basically what they're doing. Like with mortgages."