TL;DR
Nvidia's circular financing scheme artificially props up demand for its AI chips, but the model is showing cracks.
A pep rally for GPUs
Imagine Nvidia's CEO Jensen Huang at an all-hands meeting, barking like Trump about how great the company's GPUs are and how customers can't get enough. The reality: those customers are mostly losing money, and over 90% of Nvidia's revenue now comes from data center hardware.
Selling shovels, then loaning money to buy them
To keep the chips moving, Nvidia has invested in AI companies like OpenAI and Perplexity, and backed cloud startup CoreWeave, so they can buy more Nvidia hardware. It's like a shovel seller who not only sells shovels to gold miners, but also lends them the money to buy shovels, and even opens a gold mine to buy shovels from himself.
How long can the bubble last?
Nvidia's playbook is simple: either convince the world's biggest companies to spend $100 billion a year on its chips, or inflate revenue through circular financing. So-called 'sovereign AI' customers and 'neoclouds'—companies that borrow heavily to buy GPUs—now match hyperscalers in sales volume, but many are just shells.
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