Vendor financing is already a sign of an unhealthy market. When widespread, almost always. If the only easy way you can borrow enough to buy a thing is from the vendor, that’s bad. And if vendor financing is an increasing, not decreasing, proportion of the finance in a market, that’s worse.

Channel-stuffing, if it is happening, is usually plain illegal.

The implications are obvious: if people are using GPU scarcity and prices as a proxy for AI demand (and they absolutely have and still are, at every level), and use it as an indication that they must secure GPUs while they can, then it matters a lot if in fact that demand is being padded out and front-loaded in various ways.

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conductr an hour ago | parent | next [-]

Yes, but also, vendors are best positioned and most incentivized to be the lenders for their customers. They often just provide unbeatable terms compared to all options, even better than cash for those who do have that option and ability.

A financing company usually is fully taking the credit risk. They have to charge a high interest and hope their underwriting process is sound. That is generally the only way they make money from the transaction.

A vendor can give 0% interest or even a discount to financing customers because they are protected by the profit margin of the transaction. They can also have a looser underwriting process and take more credit risks while doing so.

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quantified 24 minutes ago | parent | prev | next [-]

The enthusiasm for consumption seems real, though. Very large enterprises would purchase many more if they could.

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gruez 2 hours ago | parent | prev [-]

>Vendor financing is already a sign of an unhealthy market. When widespread, almost always. If the only easy way you can borrow enough to buy a thing is from the vendor, that’s bad. And if vendor financing is an increasing, not decreasing, proportion of the finance in a market, that’s worse.

How much % of car loans are vendor financed?

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gizmo686 2 hours ago | parent | next [-]

Almost none. Dealerships will arrange financing for you, but the actual financing comes from a third party financial institution. The dealership walks away from the deal with the full cash value of the sale; and maybe a kickback from the bank. The concerning thing with vendor financing is that the vendor is supposed to be in the widget business, not the financing business. If they are getting into the financing bussiness, that is generally a sign that the professional financers don't want to get involved; which is not a good sign.

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ak217 2 hours ago | parent | next [-]

captive lender originations account for between 20% and 30% of the us auto loan volume depending on whether you count the loans or the volume

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ralph84 2 hours ago | parent | prev | next [-]

You're being deliberately obtuse. Every auto manufacturer has a captive finance arm. That captive finance arm may be operated by a financial institution, but the financing is subvented by the auto manufacturer. Chase isn't offering 0% financing on a Subaru because they like the car, they're offering it because Subaru pays them to.

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dofm an hour ago | parent [-]

This is, nevertheless, a quite different story. Nvidia does not have a captive finance company.

The concern has to be that ordinary financial institutions might not make such loans to startups, and that therefore Nvidia is using vendor finance to create sales that otherwise would not happen.

Rather than the auto loan system, where essentially the front face of an entire finance industry has moved into the dealerships but you can still get a car loan outside it.

	▲	conductr an hour ago \| parent [-]
		> Nvidia does not have a captive finance company You don’t need to when you have a few dozen customers you’re doing this for. You meet with them and plot world dominance over cocktails. Auto companies have the structure they do to support 1000s of dealerships and millions of customers.

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a34729t an hour ago | parent | prev [-]

Bullshit. Most of our economy is financing. Airlines are literally credit card companies with some aircraft leases attached.

	▲	dofm 40 minutes ago \| parent [-]
		Right but aren’t you kind of underscoring the point? It’s not really the kind of vendor finance we are talking about then; it’s really just the finance industry moving into loaning other things, moving the storefront into another business. It’s pretty highly regulated. Vendor finance of the kind Nvidia is doing is different: they are the single vendor for one thing, they are loaning to startups who otherwise might not get funding from banks, it’s coming from the same balance sheet as the product, and these loans are materially causing GPU scarcity. In general, vendor finance of the kind Nvidia is doing is indicative of an uncertain market, and when it’s the only vendor and it causes the price of the thing to rise, that’s obviously bad. The industry is very aware that it relies on this for its continuing growth and stability.

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dofm 2 hours ago | parent | prev | next [-]

I don’t know, because I am in the UK and I don’t know exactly what definition of vendor finance you’re working with.

For example, here in the UK, that is extremely regulated, and you’re usually not buying with the dealer’s money, or the dealer chain’s money. Sometimes you are buying with the manufacturer’s money (through a regulated subsidiary finance company or joint venture) but most of the time you’re simply buying with money from a regulated finance company, from which the dealer is getting an introducer’s fee (and for which they must agree to be regulated).

(I am not a driver and have no car loans but I am reasonably familiar with the business model from previous client business)

It is my understanding that Nvidia is pretty directly using their own money for this: there is a criticism that they are essentially “selling their balance sheet as a service”, and that their total exposure is about $200 billion.

Nvidia’s loans are not, in that sense, particularly comparable to even the loosest definition of auto loans. Not least because there’s no competition for the products.

This is all putting aside how much money Jensen Huang has persuaded others to loan. Perhaps that side of things won’t go away; I think we might see him carrying on that function in some future capacity. But it will almost inevitably be at a much smaller scale, because the market is significantly less enthusiastic about lending more money.

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adgjlsfhk1 2 hours ago | parent | prev [-]

it's also an issue for cat companies. they get a double whammy during economic downturn because demand drops and supply rises (due to repossessed data flooding the market)