Comment by testdelacc1
Comment by testdelacc1 16 hours ago
I’m not disagreeing, but do the AI companies want cash? If their main expenditure is infra, maybe they’re only seeking investment from AWS/Azure/GCP etc. How would an extra billion from the Saudis buy them that a billion from Amazon wouldn’t?
I’m not a fan of round tripping by any means. Just wondering if what you’re saying is true.
Why would AI companies prefer $1 billion of Nvidia credits over $1 billion cash?
Liquidity preference.
This might be a bit too convoluted, but here is a way to get straight to the point. Assume there is a perfectly liquid asset and its nominal value is $1 million. Now imagine you have stocks that are worth $1 million, but the market price fluctuates over time.
The market price of the perfectly liquid asset is always the mean, the variance is zero. The value of the stock follows a probability distribution, e.g. a Gaussian distribution. The mean is the same, but the variance means that you can't just sell the asset at any time you want.
Even when the nominal value is the same, people prefer more liquid assets over less liquid assets. The reason is obvious. More liquid assets can buy less liquid assets at face value, meanwhile less liquid assets require you to find a willing buyer to trade, which is costly both in time and effort spent on planning the transaction. If you're impatient, you'll have to sell your asset at a discount.
The opposite is also true. If you are an investor, you prefer handing out less liquid assets first, such as credits that can only be used to buy your own products.