Jensen Huang claims 100× returns on Nvidia’s circular financing
Nvidia CEO Jensen Huang is the only guy in the AI bubble who’s making money. Most of those billions of dollars that OpenAI and Anthropic are setting on fire are going to Nvidia to buy computing rigs. In this gold rush, Nvidia’s selling the shovels. Jensen spoke at the Goldman Sachs Communacopia +…
Nvidia CEO Jensen Huang is the only guy in the AI bubble who’s making money. Most of those billions of dollars that OpenAI and Anthropic are setting on fire are going to Nvidia to buy computing rigs. In this gold rush, Nvidia’s selling the shovels. Jensen spoke at the Goldman Sachs Communacopia + Technology Conference on Thursday. He addressed the hurtful and outrageous questions people are asking Nvidia, like: why do you have to pay your customers to buy your stuff? Is this just wash trading and circular financing? How many of these deals are actually deals? [transcript and audio] James Schneider, Goldman Sachs: So maybe help, for people who are skeptical, explain maybe why you believe it’s not circular. Jensen Huang: Well, it’s not circular because we put a little bit of money in, and a lot of money comes back. Is that finance talk? I look at the spreadsheet, we put in one and 100 comes back in. Is that circular? (audience laughs) This is not a promise of 100 times returns on Nvidia stock. Not a Ponzi! It’s Jensen saying that Nvidia itself gets a great return on keeping the AI bubble pumping. I don’t think Nvidia’s returns are quite like that. You have to understand the problem Nvidia has. If you’re a public company, then number must go up. As a CEO, you have to show growth and rate of growth, or the Wall Street analysts will be disappointed. And your stock goes down. Jensen can to a large extent do what he likes — he’s an original Nvidia co-founder and he’s delivered for 30 years. Wall Street will happily mark Nvidia down for a great quarter that wasn’t great enough. But Jensen does deliver the numbers on a longer scale. Nvidia has to keep those numbers going up, though. So the AI market has to keep buying Nvidia chips. Or at least, they need some sort of activity that leads to book entries of revenue at Nvidia. The illustrious Ed Zitron has dived repeatedly into the numbers on this. So I don’t have to. [Where’s Your Ed At] Nvidia took in $216 billion in financial 2026. Pretty good! But Wall Street has decided that for financial 2027, Nvidia should pull in $393 billion, and even more in 2028 and 2029. Trouble is, the GPU market is looking a bit saturated. The hyperscalers cannot keep buying Nvidia GPU rigs fast enough to keep the numbers rising — if they even have the data centres to plug them in. So the numbers have to come from somewhere. In August, Nvidia announced a new $500 billion deal! Well, a memorandum of understanding — not binding in any way — for Nvidia’s customers to get financing from various investment banks and hedge funds, so they could buy more Nvidia chips. [CNBC] Never mind just two companies are using almost all that compute — OpenAI and Anthropic — so the customers are them or their data centre providers. Nvidia is getting financing for the two biggest AI bubble companies. Jensen Huang posted to Twitter about this deal: [Twitter, archive] Is this circular financing? This initiative is designed to address that concern. We are bringing independent, long-term institutional capital into the AI infrastructure market. … In some cases, NVIDIA may provide a residual-value support mechanism for up to 25% of an opportunity, assessed carefully on a project-by-project basis. Ed Zitron says: Folks, this isn’t circular financing at all! It’s just that NVIDIA will pay some sort of 25% “residual-value support” so that private credit can use that as collateral to raise debt to buy GPUs from NVIDIA. If anything it’s spherical! The real purpose of the “$500 billion” announcement was to keep confidence in the AI bubble up. While the large AI vendors collude to keep their costs down before they run out of money next year. Video — PodcastSource: Pivot to AI — Published — Category: Business