Nvidia’s recent blockbuster results, with a 62% surge in turnover, initially soothed fears of an AI bubble burst. However, the euphoria was short-lived as its shares tumbled, wiping $700 billion from its peak $5 trillion valuation. CEO Jensen Huang expressed frustration, stating the market placed the firm in a ’no-win situation’ where any minor miss would be catastrophic.
The company now confronts growing threats from competitors like Google, which uses its own chips for its Gemini AI model, and other tech giants Microsoft and Amazon developing custom AI processors. This move reduces their reliance on Nvidia’s expensive GPUs. Furthermore, massive, debt-funded investments in AI, exemplified by OpenAI’s complex $1.4 trillion deals against modest revenue, fuel concerns the sector is a vast money pit.
Investor Michael Burry has highlighted ’suspicious revenue recognition,’ pointing to Nvidia’s $33 billion in accounts receivable, meaning over half its sales are unpaid. This reliance on just six customers, who account for 85% of sales, creates significant risk if they cut spending or develop their own chips, casting a shadow over Nvidia’s seemingly invincible numbers.
