Monologue: Into The Jensenverse

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2:28the groundhog once again saw its shadow with nvidia reporting record earnings continuing to inflate an ever more dangerous ai bubble with 96 billion dollars worth of revenue and 16 of that coming from a single unnamed customer for the first half of the fiscal year 2027 44 of nvidia's $177.8 billion in revenue came from a mere three customers. And as a note, this was all part of its second quarter fiscal year's 2027 earnings. You're going to be confused, but NVIDIA's fiscal years run from February 1st of the year before to January 31st of the year of. So it's currently fiscal year 2027, which begun on February 1st, 2026.

3:06Annoying, but I didn't do it. Don't blame me. Don't be mad at me if our NVIDIA does business. Anyway, to make matters worse, 70 % of NVIDIA's current accounts receivable, so Geared has been shipped to a customer that's yet to be paid for, is from 5 customers. Something that NVIDIA reported while adding that for certain investment-grade customers, it was offering payment terms ranging from 90 days to an entire year. If you're wondering what investment-grade could refer to, both CoreWeave and Nebius, two unprofitable Neo clouds that exist only to raise debt and buy GPUs, mostly to rent them to the same 3 or 4 companies, have had their debt rate as as investment grade by ratings agencies because they're collateralized by contracts by companies with good credit.

3:47What is it with ratings agencies? It's just like every time you put your hands in front of your face and they'll be like, where'd they go? Anyway, all of this is a very complex way of saying that the vast majority of NVIDIA's revenue comes from a handful of companies. Each one, including hyperscalers that make up more than 50 % of its revenue over the last few years, are now reliant on debt thanks to skyrocketing costs of NVIDIA's GPUs. 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-dombed by Jensen Huang, and it's all beginning to look like the AI bubble only continues to inflate as long as NVIDIA can keep pumping it full of money and hype.

4:27You see, in the run-up to earnings, NVIDIA sunk$6 billion into Poolside, a flailing open-source LLM company that failed to raise billions of dollars earlier in the year, hiring away most of its staff in what its founders said was not an acqui-hire. Other than the fact that everyone's leaving, other than the founders. Anyway, NVIDIA is also rumoured to be sinking billions into pathetic AI search company Perplexity, a$30 billion valuation, which is insane and it's not worth that. Likely because Perplexity is one of the few companies in the world that buys any significant amount of AI compute. Likely a few hundred million dollars a year, but I'm just guessing.

5:00It's also investing in Stargate Abilene Landseum at a multi-billion dollar valuation As well as considering putting money into AI data center power company Cloverleaf And backstopping over$100 billion of a soft bank backed data center for OpenAI to rent out in Ohio Though that backstop only kicks in if the thing actually gets built Ship, ship, sorry, forgot one NVIDIA is also buying AI model hosting platform Hugging Face for a little under$13 billion For some context, Hugging Face had$150 million in annualized run rate, which works out to a pathetic$12.5 million a month. Which is insanely small, considering its notoriety.

5:39It's almost as if every AI company just kind of stinks. As a reminder, NVIDIA has invested in Anthropic, OpenAI, CoreWeave, Nebius, IREN, N-Scale, Intel, SpaceX, and both RECA and WECA, which are somehow two different companies. It has backstopped CoreWeave's leases, signed over$30 billion in multi-year agreements to rent back its GPUs, and created bizarre revenue share deals where it agrees to backstop data centers and receive a cut of the revenue above a certain threshold, which is obviously dependent on the bloody thing being built and also being paid for. And on its latest earnings call, CFO Colette Kress said that the company did not see this as circular financing.

6:21Despite there being so many different deals where the money moves in a perfect circle, the main of James Keenan is mumbling some shit about Judith and Magdalena. The AI bubble is becoming increasingly about whether Jensen Huang and NVIDIA can keep slapping duct tape on the sides of data center and AI model companies. And in turn, whether hyperscalers can keep raising enough debt to keep paying for their GPUs and more. To quote Lindsay Tyler and Nishant Sadyam of Morgan Stanley, NVIDIA is now a balance sheet as a service company with over$366 billion in commitments, including$25 billion of data center leases yet to commence, which is strange considering NVIDIA is the company that sells the data centers, the GPUs.

6:59Why does NVIDIA need to rent back the GPUs? I thought the demand for AI was so high, Jensen. And if you weren't already a little bit concerned, 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. This has, of course, not actually happened, will not actually happen, and should genuinely get him lambasted in the press, but because number has gone up, everybody is happy. Yay! Yay! Good job, Jensen! AGI's here! Yay! Fucking kill me. Yet somehow the dumbest thing that was said on the earnings call came from NVIDIA's CFO, said that NVIDIA will grow its revenue by 70 % in fiscal year 2028, which begins February 1st, 2027.

7:45I know it's annoying. And based on consensus estimates for the current fiscal year being at$396 billion, this means that NVIDIA is expecting to make over$674 billion next year. It's not impossible, but to do this, NVIDIA will need its current customers, predominantly Amazon, Google, Microsoft, Meta, SpaceX, and Oracle, to likely double their current orders for GPUs, as well as neoclouts like CoreWeave to raise even more debt than they're currently raising. And to be abundantly clear, CoreWeave is already having to pay over 9 % interest on its debt just to get investors through the door. Again, not impossible, but it's going to require so much more debt.

8:23I mean, this must be over a trillion at this point in the next year. It's completely fucking insane. And much like OpenAI and Anthropic must continue growing their revenues, customer base and funding grounds to meet over$1.1 trillion in compute agreements, NVIDIA must, through science or magic, find ways for its customers to be able to buy more and more and more GPUs every single quarter from here into eternity. As I've said again and again, the AI boom is only possible as long as debt can sustain it. SoftBank has had to take out tens of billions of dollars of debt to fund OpenAI and now is trying to sell$20 billion of bonds to refinance that debt.

9:00CoreWeave can only keep building data centers as long as the banks give it money. Oracle, Google, Amazon, Meta, and SpaceX cannot afford to buy GPUs out of cash flow, and thus are dependent on debt to continue buying those GPUs. Even NVIDIA itself has had to take out over$25 billion in bonds. Maybe it's$20 billion. Regardless, still a lot of money. And that supposed$500 billion fund, I'm doing air quotes, you can't see it because this is an audio podcast per Bloomberg is nothing of the sort. I'll link to the article in the notes, but 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.

9:39Hyperscalers are only spending this money because Anthropic and OpenAI have committed to spend over$400 billion renting GPUs in the next three and a half years, according to analysts. And without that spend, 30 % or more of their cloud revenues will evaporate. for example per UBS Anthropic and OpenAI will make up over 48 % of Google Cloud's revenues in 2027 which will only be possible if they can both afford to spend the money and the data center capacity is actually available and data centers are taking forever, another problem Nvidia is investing in every schmuck with a penchant, that's definitely how you say it for AI models because any AI company becoming insolvent or doing a down round would break the illusion that AI is the next industrial revolution, rather than a series of different companies handing money to each other in the hopes that a business model arrives.

10:29The reason nobody is freaking out is that nothing bad has happened yet. NVIDIA's big customers can still raise money to pay it, and its horrible Neo Cloud progeny can continue to loot the debt markets from gullible investors who have been lied to by analysts and the media about AI's promise and stability. 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. I'll be back next week with my boys Caleb and Arif to talk about horrible AI slop and whatever else crosses our wretched little minds Thank you for listening.

11:00I love you all

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