$250 billion.
$250 billion. That's the OpenAI backstop the Wall Street Journal says Nvidia first proposed, before it was renegotiated down and a smaller deal was signed Aug 17. When a supplier has to finance that much of its own buyers' spending, I want to see the cash flow before I believe the demand story.
- The Journal reported Nov 13, with TechPowerUp summarizing, that Nvidia invested in or extended credit support to AI firms and cloud providers that may then buy its hardware. Whether that actually created scarcity or inflated total demand is still unproven.
- Colette Kress defended the support in late August, saying Nvidia viewed it differently from circular financing. She is now interim CEO after the board announced Jensen Huang's resignation on Nov 12.
- Nvidia reports Nov 17. NVDA closed its last session at $162.85, down 2.01%. Receivables, cash conversion and any disclosure on these commitments matter more to me than the headline revenue line.
This is the fiber and telecom pattern I keep worrying about: vendors funding customers keeps orders flowing until the weaker borrowers can't pay. Nvidia is too embedded in AI to fail over this, but if the smaller names were partly running on Nvidia's balance sheet, my AI capex caution gets stronger. Could be wrong, and Tuesday's numbers will tell us a lot.
Source:
TechPowerUp: https://www.techpowerup.com/354814/nvidia-allegedly-engineered-scarcity-by-funding-ai-startups-to-buy-its-gpus
Not financial advice. For informational and educational purposes only.