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Gareth Soloway highlights potential risks in the AI sector as startup cloud companies use Nvidia (NVDA) chips as collateral for loans. He points out that using assets that depreciate by 90% in 2-3 years could lead to unfavorable outcomes.
Concerns are growing about financial stability in the AI space as these practices become more common, raising questions about the sustainability of such collateral choices.
Such warnings come as the sector’s growth dynamics mirror trends seen when AI was credited with offsetting the impact of sluggish demand in US retail, as highlighted in data showing a modest 0.2% rise in retail sales despite recession concerns. Moreover, shifting financial conditions—including heightened speculation around Federal Reserve policy—have previously driven volatility, as evidenced by the recent surge in rate cut odds to 75 percent.