Monologue: NVIDIA's No IT Loads Refused Cash Dump

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2:03Don't go down the rabbit hole. Amazon Health AI gets you the right care, fast. Healthcare just got less painful. Call Zone Media Hello and welcome to this week's Better Offline monologue, I'm your host Ed Zitron.

2:28I know some of you are going to say, Ed, why are we hearing a monologue on a Wednesday? I don't like change. I'm screaming. I'm screaming and crying. And the answer is we're going to have a full in-studio episode running Friday with mainstays Chloe Radcliffe and Ed Ongueso Jr. They're back, folks. And those of you in the New York metro should also get tickets to see Chloe's new stage show, Cheat, at Joe's Pub. Link will be in the episode notes. It's actually fantastic. It's genuinely one of the best things I've ever seen, and I generally don't like going outside. Anyway, man, let's talk about this fucking NVIDIA deal.

2:59Earlier in the week, various media outlets reported that NVIDIA was lining up$500 billion in financing for AI infrastructure, in partnership with Apollo, Blackstone, BlackRock, Brookfield Asset Management, Goldman Sachs, KKR, Cobra Command, Gargamel, Gruen the Minions, Mortimer McMyer from Commander Keen, and the ghosts of Margaret Thatcher and Ronald Reagan. Okay, well, technically partnership and lined up don't really reflect the truth of the matter, and neither does$500 billion for that matter. What actually happened was NVIDIA signed memorandums of understanding, which are not worth the paper they're printed on, with six asset managers to maybe build some data centers at some point using money they might raise the wall street journal also reports in a paragraph that was since removed from the story that the financing would involve different vehicles rather than one large collaboration meaning that they'll probably just raise a bunch of data center deals separately in exactly the same way they've already been doing and have already funded across the board they're in core weave they're in every goddamn deal every single person i've just named other than obviously the joke ones is involved with core weave or an ai data center of some sort Jesus fucking Christ, not in any of the stories either.

4:08In any case, all of this is entirely theoretical because a memorandum of understanding from NVIDIA is worthless. In September last year, NVIDIA CEO Jensen Huang, along with OpenAI executives Clammy Sam Altman and Greg Brockman, went on CNBC to talk about how it was investing$100 billion in OpenAI to build 10 gigawatts of compute capacity, and that said deal was monumental in size, even though the deal was based on a memorandum of understanding in the end one would claim to taiwanese journalists that this was and i quote never a commitment and that nvidia was invited to invest a hundred billion dollars and they were happy and honored as a result in the end nvidia invested 30 billion dollars in open ai six months after the announcement of the original deal and open ai built zero gigawatts of data center capacity as a result poverty's nerfect you know just these things happen things move crazy seven 70 billion dollars didn't happen 10 gigawatts of capacity didn't get built nothing happened just completely fucking false they did an interview on cnbc just like they did with this deal i feel like i'm going insane anyway on monday night huang went on twitter and delivered a seemingly ai written screed or maybe he's just a shitty writer about this theoretical partnership adding that nvidia would and i quote provide a residual value support mechanism for up to 25 percent of an opportunity assessed carefully on a project-by-project basis and if you're wondering what that means that makes two of us that was very clearly collect crest the cfo and the legal council just being like jensen you will fucking run these you will run this goddamn sentence i will i'll get the club jensen anyway if i had to guess that 25 refers to nvidia guaranteeing a certain amount of compute revenue for the company building the project as in like they will guarantee that, say, if OpenAI can't afford to pay, they'll cover the costs up to 25%, which would in turn allow this developer to raise billions of dollars to buy NVIDIA GPUs.

6:03This is actually very common. It's how CoreWeaves raised a bunch of debt. They go to the various financiers and they say, hey, look, I got a contract. I got a contract from a customer. Sometimes that customer is NVIDIA, by the way. And the bankers go, oh, shit, you got a guaranteed contract, huh? I'll give you the money for this. Yeah, you look like you're running out of money and we're going to need to do 9 % interest, but fuck me up, Grandpa. I should also add that none of this is actually real until actual contracts are signed and actual money is raised, and that Jensen Huang's word is effectively worthless at this point.

6:35In the Twitter post, Huang also added two questions to, I imagine, alleviate concerns. He responded to the question of whether this was circular financing by saying that this initiative was built to address that concern, bringing independent long-term institutional capital into the AI infrastructure market before adding that the demand is real and it comes from Frontier AI Labs, followed by a series of other companies that do not have significant demand for AI compute, ending by saying that this was the beginning of an open capital market for AI infrastructure, which means nothing. Just to be clear, this is absolutely circular financing.

7:11NVIDIA is helping companies raise debt, offering a guarantee on that debt to make sure that the debt is issued, all so that NVIDIA can be paid using the proceeds from that debt which NVIDIA is guaranteeing. Its customers are companies that can quite literally not afford to buy its products, mostly because they lack an effective business model or the cash flows to do so. I'll add that it's also laughable to read someone say that the demand is real as they attempt to raise half a trillion dollars explicitly to create demand. Yet my favorite at par was jensen's last question where is the return on investment his answer was i shit you not that the return is the usefulness of ai fuck off man fuck you shut the fuck up fuck fucking motherfucker that is not what return on investment refers to and you know it apparently the usefulness of ai is not significant enough to provide cash for your customers to pay you outside of financial wizardry that would make Andy Fastow blush.

8:07If there were actual diverse demand for NVIDIA's GPUs commensurate with analyst expectations, you wouldn't have to do these bizarre, painfully circular deals that exist only to inflate your fucking revenues and further prop up the existence of unprofitable AI labs. You know this, Jensen. You're full of shit. Anyway, if Jensen Huang actually listens to that, I would be really surprised if you know Jensen and want to play this for him i really am just quite excited for it he's never gonna hear it he has no idea who i am who cares though anyway anyway this deal is about as real as stargate and will work out much the same way for those of you who forget trump altman ellison and masayoshi son announced in january 2025 that they would be building 500 billion dollars worth of ai infrastructure even though no actual money was raised no partnership was created and genuinely no llc was ever formed In the end, Stargate was a name that got put on any OpenAI data center, no matter how it was funded, and mostly referred to Oracle's massive build-out for the least viable customer of all time.

9:08It was just a chance for Trump to get up there post-inauguration and go, we're going to build the biggest buildings, it's my beautiful friend Larry, and then nasty friend Sammy is a nasty clammy little man. And yeah, I could do that for an hour, I'm just going to stop myself. In Jensen's case, I expect further data center deals to get funded by these asset managers that get referred to in brief as part of the$500 billion partnership with NVIDIA, and I expect the media to dutifully say that too. They will help ratify this as they did with Stargate, even though not a single data center being built is part of a Stargate initiative of any kind because one does not exist.

9:44Even though, I should be clear, Jensen will do these deals and nothing has functionally changed. NVIDIA has already been offering preferred pricing and guaranteed compute spend to inference providers. It already discussed backstopping OpenAI data centers. It already backstopped one of CoreWeave's leases. And it will continue to do whatever it can to keep growth going and to sell more GPUs. Now, if you're wondering why they're doing all this craziness, it's because consensus analyst estimates for revenue for the next three years are utterly fucking insane. NVIDIA made about$216 billion in fiscal year 2026, which ended on January 25th, 2026.

10:21Frustratingly, it's really annoying. and analyst expectations have it at 393.7 billion dollars in fiscal year 2027 a little under doubling its revenue year over year in fiscal year 2028 expectations are 565.7 billion dollars and in fiscal year 2029 nvidia is expected to make 694 billion dollars over 90 percent of its revenues come from selling gpus and other data center hardware so nothing else is going to make up the shortfall here. And I realize that's a lot of numbers, so I'll put it real simple. NVIDIA is expected to sell over$1.6 trillion worth of GPUs by January 2029, and the vast majority of its customers, including hyperscalers, are having to take out hundreds of billions of dollars worth of debt to pay for it, if they can even raise it.

11:07As I discussed last week, 70 % of Microsoft, Google, and Amazon's AI revenues come from OpenAI and Anthropic, meaning that the demand does not exist at remotely the scale necessary to justify this AI data center capex jensen hwang has no choice but to engage in the darkest arts of circular financing to keep up with investor expectations but honestly i think everyone's kind of running on empty anthropic is apparently having to reassure investors about the dangers of open source competition as it rushes towards a september or october ipo adding that it's going to do stuff in biology to deal with the negative perspective that people might have on ai fucking laughable open ai just lost coo brad lightcap a day after completing a seven billion dollar internal stock buyback which is peculiar when a company does an employee share sale which is when insiders like people who've worked there for years sell their stock they usually sell to external investors rather than pilot the company's cash buying it in fact i looked around and i really struggled to find examples of this even SpaceX found dupes to sell it to and every other open AI internal share sale involves selling to Thrive Capital or SoftBank.

12:15Is Masayoshi-san not quite as horny? Is he not into it anymore? Is he not getting his rocks off? Is this not the golden goose anymore, Masayoshi-san? What's going on, Masayoshi-san? Why didn't you invest more? And I realized, by the way, this share sale was at the$852 billion valuation from March, so maybe they didn't want to double down i don't know if you think this company's actually going to go public it feels strange for you to sell at this point unless of course you don't but yeah things are about to get a little desperate the 500 billion dollar deal didn't move the markets much with nvidia down about half a percent about an hour before market close which means investors are no longer impressed by jensen hwang's fantastical promises and it worked really well last year end of last year You could just say, yeah, we're going to sell a gazillion GPUs to this guy, and the markets would give you 5%, 10 % on the day.

13:08Not so much anymore. The con's not working. And I'll be here to shepherd you through wherever the con goes next, and however insane it becomes as a result. Thanks as ever for listening.

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