Same guarantee. New asset class?
Nvidia and Tesla have both backstopped the value of their products. One becomes an investable asset class, but the other doesn’t. Why?
Nvidia backstopped the value of its GPUs and called this a new financial asset class. When Tesla did this for the model S, no one decided Teslas or even robotaxis are the next commodity to trade on the CME.
In 2022, Tesla tied the value of a second hand Model S to that of a Mercedes S class. The idea was to underwrite the value of the car so that people buying them on finance would have lower monthly payments. The lender would have a guaranteed minimum future value of the car, allowing lower capital repayment and reducing the risk allowing a lower interest rate.
Tesla didn’t call this a new investable asset class.
Nvidia did the same thing last month for GPUs. But now they’re considered an asset class.
Nvidia claims that “software innovation allows an AI factory to produce more intelligence at lower cost throughout its life, extending its useful economic value.”[i] I don’t think Tesla made similar claims about their cars though arguably they could have. Well maybe not so much now unless Full Self Driving does actually get delivered but at the time they could have.
So, what makes GPUs an investable asset but not cars. What makes one depreciating asset a new tradeable commodity but not another?
Partly a rhetorical question, but I also got into some depth on this topic last week.
[i] https://blogs.nvidia.com/blog/nvidia-ai-factory-compute/?ref=cloudhpc.news
