Nvidia's Earnings Mask an AI Bubble Fueled by Debt and Circular Financing
Nvidia's stunning results depend on a handful of customers and circular financing. Whether the AI bubble lasts hinges on the debt market staying open forever.
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Nvidia's revenue is dangerously concentrated
Nvidia's earnings show staggering revenue, but 16% comes from a single unnamed customer, and 44% of revenue comes from just three customers. Of its accounts receivable, 70% comes from five companies, and it offers investment-grade customers payment terms of up to a year. This concentration means Nvidia's boom rests on a few giants continuing to buy; if they cut back, results would plummet.
— Ed ZitronCustomers buy GPUs with debt
Nvidia's main customers, including hyperscalers, rely on debt because of soaring GPU costs. New cloud companies like CoreWeave and Nebius are rated investment-grade only because their contracts come from creditworthy firms. Nvidia even offers payment terms from 90 days to a year, further tying itself to customers' debt positions.
— Ed ZitronNvidia is throwing money around
Nvidia invested $6 billion in Poolside, acquired Hugging Face for nearly $13 billion, and is rumored to invest in Perplexity, Stargate, and others. Most of these targets are loss-making AI companies. Nvidia seems to be using investments to maintain the illusion of a thriving AI ecosystem, preventing any single company from collapsing and popping the bubble.
— Ed ZitronCircular financing is denied
Nvidia's CFO denies circular financing, but a flood of deals shows money cycling among Nvidia, customers, and investees. Morgan Stanley calls Nvidia a 'balance sheet as a service' company, with commitments exceeding $366 billion. Nvidia both sells GPUs and leases them back—a contradiction that raises questions about the authenticity of demand.
— Ed ZitronJensen Huang claims AGI has been achieved
On the earnings call, Jensen Huang declared that the world has achieved AGI, but Ed argues this hasn't happened and shouldn't be glossed over by the media. Such claims contrast sharply with Nvidia's financial maneuvers, highlighting the disconnect between AI hype and reality.
— Ed ZitronFuture growth requires astronomical debt
Nvidia's CFO projects 70% revenue growth in fiscal 2028 to $674 billion, which would require existing customers to dramatically increase orders and new cloud companies to take on more debt. CoreWeave already pays over 9% interest, and the whole system needs more than $1 trillion in debt to sustain—something nearly impossible to maintain.
— Ed ZitronThe $500 billion fund doesn't exist
Bloomberg reports that the so-called $500 billion AI data center fund has no actual source; it's just Nvidia announcing that asset managers will invest, with the number baseless. Hyperscaler spending depends on Anthropic and OpenAI's promised $400 billion in GPU leases. If those promises fail, cloud revenue would evaporate by over 30%.
— Ed ZitronBubble's fate hinges on debt
Nvidia invests in every AI company to prevent any one from collapsing and undermining the 'AI revolution' narrative. No one panics now only because nothing has gone wrong yet, but everything depends on infinite resources continuing. When the debt market tightens, the music stops.
— Ed ZitronIn their own words · checked verbatim
The Groundhog once again saw its shadow with Nvidia reporting record earnings, continuing to inflate an ever more dangerous AI bubble with $96 billion worth of revenue and 16% of that coming from a single unnamed customer.
Ed Zitron0:03
While Nvidia is unquestionably profitable and thriving revenue-wise, it's only doing so because of a few companies who are willing to be fin-dommed by Jensen Huang
Ed Zitron2:06
NVIDIA is now a balance sheet as a service company with over $366 billion in commitments
Ed Zitron4:08
Huang also claimed on an analyst call that the world has already achieved artificial general intelligence, which he defines as the ultimate form of the technology where the machines can think and act for themselves.
Ed Zitron5:08
that announcement was literally just NVIDIA saying that a group of asset managers would invest half a trillion dollars in AI data centers, and that number, and I quote, had no obvious provenance.
Ed Zitron7:11
Everything comes down to whether near-infinite resources are available for AI in perpetuity, and when those resources slow or stop, so too will the music.
Ed Zitron8:12
Figures
| Nvidia quarterly revenue | $96 billion | 0:03 |
| Revenue share from top three customers | 44% | 0:03 |
| Share of accounts receivable from top five customers | 70% | 1:05 |
| Investment in Poolside | $6 billion | 2:06 |
| Price to acquire Hugging Face | just under $13 billion | 3:07 |
| Hugging Face annualized revenue | $150 million | 3:07 |
| Nvidia's commitments | $366 billion | 4:08 |
| Expected fiscal 2028 revenue | $674 billion | 5:08 |
| CoreWeave debt interest rate | over 9% | 6:09 |
| Anthropic and OpenAI committed GPU leases | over $400 billion | 7:11 |
Glossary
- fin-dommed
- Being controlled or dominated by financial means; here, describing customers being shackled by Nvidia's financial arrangements.
- balance sheet as a service
- A company whose main business becomes providing balance sheet support rather than traditional products.
How to listen
Investors and founders focused on the AI bubble and tech valuations, as well as anyone wanting to understand the risks behind Nvidia's business model.