@FinanceYF5: 1/ Nvidia currently has over $750 billion in pending AI deals. Bloomberg says the way these deals are structured is making even shareholders uneasy.

1/ Nvidia now has over $750 billion in AI deals on the table at the same time.

Bloomberg says the way these deals are structured has even the shareholders holding this stock starting to get uneasy. https://t.co/p4qVqqFPGy

2/ One of them is a $500 billion deal with South Korea’s SK Group.

And the one with OpenAI — Nvidia is backing up to $250 billion in debt for OpenAI, and putting up another $350 billion to fund OpenAI’s chip purchases.

3/ Most of these deals follow the same cycle: Nvidia gives money to the other party, and the other party returns the money to buy Nvidia’s chips.

Jensen Huang says calling this a “cycle” is “absurd” — Hedgie doesn’t think so.

4/ His take: The so-called cycle essentially means Nvidia is paying part of the bill for the chips it’s selling — some of those impressive revenue numbers are really Nvidia’s own money going out one pocket and coming back in another, which can make demand look bigger than it actually is.

5/ This also welds Nvidia and OpenAI together — and OpenAI is still losing money on everything it does.

As long as OpenAI keeps growing, none of this is a problem; but if there’s any turbulence, Nvidia gets hit twice: once on the debt it guaranteed, and once on the chip orders that get canceled.

6/ He doesn’t buy Huang’s “absurd” claim.

The fact that a company needs to lend money to its customers to buy its own products says something about those customers not being able to pay on their own yet.

7/ He’s not saying the sky is about to fall — Nvidia does sell to plenty of real buyers with real money.

But this structure looks like genius when the stock is rising, and it becomes pretty obvious when things turn down. He’d rather point it out now while the stock is still near all-time highs than have to explain it after ugly earnings.

Source:

Nvidia strikes again — this time investing $5 billion in Ilya Sutskever’s Safe Superintelligence.

This is one of Nvidia’s largest investments in the current AI boom, according to Bloomberg, citing people familiar with the matter.