Is Nvidia Selling More Chips Than Anyone Can Use?

Space Exploration Technologies

Across the shows: 18 speakers in other episodes, 12 bullish and 5 bearish calls, past 30 days

• Nicolas Owens · MorningstarBullish

  Starlink subscriber growth beat expectations and was the highlight of SpaceX's quarter.

  Owens says the quarter was good and has a very strong trajectory, and that the highlight was Starlink. Subscriber growth was much higher than he had expected at this point. He treats the quarter-to-quarter numbers with caution, arguing that a single quarter can't be extrapolated into a linear path, because capex and project timing are lumpy. Even so, the Starlink subscriber result stood out as a clear positive.

  “Perhaps the highlight was Starlink. They had a lot more subscriber growth than I had anticipated at this point.”at 29:12

• Nicolas Owens · MorningstarBearish

  SpaceX's fair value is about $144 per share, well below the market price.

  Owens builds a valuation on defensible economic assumptions and gets to about $144 per share. He says that's the value if SpaceX only rents out its Colossus compute capacity for the next five years and never launches another satellite. He doesn't expect that scenario. The business is good, but whether rental income is durable depends on the run rate and profitability of rentals over the longer term. He notes the numbers he gets are about half the market price. Earlier, he said the stock was down from its IPO price before earnings and had since rebounded. He also points to structural demand from a thinly floated share base as a reason for excitement, but says valuation is what he has to get right.

  “I can get to $144 fair value if all they do is rent out Colossus for the next five years, and never launch another satellite. I don't think they're going to do that.”at 32:57

• Nicolas Owens · MorningstarUncertain

  Renting out compute is SpaceX's best near-term play, but rising supply may flatten rental pricing over time.

  Owens argues that over the short term, or three to five years, SpaceX's best play is to rent out the capacity it has built. Anthropic and others have the money to pay for it as they grow their user bases. But he says it's unclear whether the economics hold beyond a quarterly horizon out to 2027 or 2030. The rental deals run about three years and can be cancelled. Demand currently outstrips supply, and suppliers are building more capacity. Normal market dynamics would suggest supply catches up, which could flatten rental income. He also says GPUs lasting about five years create a steep depreciation cliff, and that SpaceX's comment on using most of its capacity for Grok conflicts with renting it out.

  “Sure, it's under capacity now... demand outstrips supply, and what we see is a bunch of picks and shovels going out and building more supply.”at 33:23

NVIDIA

Across the shows: 21 speakers in other episodes, 16 bullish and 7 bearish calls, past 30 days

• Ed Zitron · EZPRBearish

  Nvidia is channel stuffing by forcing early rack deliveries, inflating revenue and driving up memory costs.

  Business Insider reported that Amazon's arrangement for paying for Nvidia racks changed. Previously Amazon paid when racks were about to be installed, but an 'early rack receipt program' started, so Amazon had to take racks it had no foreseeable path to installing. Amazon was reportedly receiving about $3 billion of deliveries every month. Zitron reads this as Nvidia pressuring customers to take chips early, or lose allocation (the 'Jensen jail' dynamic), to pump its earnings. He also cites ballooning receivables, with five customers making up 70% of them, and says the scarcity claim doesn't hold when hyperscalers have hundreds of billions of GPUs they can't install. He argues the stockpiling bids up RAM and high-bandwidth memory, raising consumer electronics prices. He concedes the story doesn't prove it, saying 'even if you don't agree with me on the channel stuffing', the overbuild is a sign of trouble.

  “I think NVIDIA is channel stuffing to pump its earnings. That's a bad sign for NVIDIA.”at 9:28

• Ed Elson · Prof G MediaBearish

  Hyperscalers will buy fewer Nvidia chips next month because data centers aren't coming online fast enough.

  Elson says the clearest implication of the warehouse story is that data centers aren't coming online as quickly as hyperscalers hoped. That is reason enough for them to reduce orders, buying fewer chips next month than last month. He points to warning signs: CDS spreads on big data center names widening, Oracle's five-year CDS at a record high, flat token spending for two months, and a recently listed AI data center company falling more than 30%. He is less sure about the channel-stuffing explanation, and describes it as a supply problem rather than a deliberate plan by Nvidia.

  “the next chapter in the story is they're gonna buy fewer chips.”at 18:48

Anthropic

Across the shows: 30 speakers in other episodes, 19 bullish and 38 bearish calls, past 30 days

• Ed Zitron · EZPRBearish

  Anthropic's economics are weak and its debt should be junk-rated; its IPO should be near $1.5 trillion, not $2 trillion.

  Citing the Wall Street Journal's report on Anthropic's S-1, Zitron says Anthropic lost heavily in the first half of the year, with large losses on a net and cash basis. It has about $413 billion of non-cancellable commitments, and he argues that growth can't fix the business. He says revenue growth is slowing and the run-rate figure is plateauing, and that Anthropic is pushing into drug discovery because it is running out of coding revenue. Ramp data show 80% of revenue comes from 1% of customers, mostly unprofitable venture-funded AI startups. He says Anthropic is a load-bearing part of the AI trade (70% of compute spend is Anthropic and OpenAI), and that these companies aren't economically viable unless you squint. He predicts a public valuation of about $1.5 trillion, not $2 trillion. The transcript's '$1.05' appears to be a transcription error for $1.5 trillion, given his earlier 'one five' versus 'two' comparison.

  “I think that they should get rated CCC by Moody's and S and P. They are junk, junk, junk.”at 23:21

AI infrastructure & data centers

• Ed Elson · Prof G Media

  Chip-buying mismatch is more likely caused by data center build-out delays than deliberate Nvidia pressure.

  Elson accepts that there is a mismatch between chip purchases and data center construction, and that chips are piling up in warehouses. He thinks the more plausible explanation is supply-side: data center construction is being massively delayed, and builders underestimated how difficult and expensive it would be to build. Political backlash, such as local communities opposing projects, could be a real problem for the AI build-out. In this view, hyperscalers bought chips expecting data centers to come online within months, then learned they wouldn't. He compares it to the railroad overbuild: too much track was laid, and it is now sitting unused. He is less convinced that Jensen Huang is deliberately forcing early orders.

  “It does appear that data center construction is being massively delayed.”at 11:33

• Ed Zitron · EZPR

  Hyperscalers are overloaded with unused GPU assets and investors will eventually force a capex pullback.

  Zitron says hyperscalers are holding large amounts of chips and construction-in-progress assets that aren't installed. He cites about $374 billion of construction in progress across CoreWeave, SpaceX, Amazon and Google, and a Microsoft capacity gap (about 2 GW of AI capacity versus roughly 12 GW total). He argues these companies don't disclose capacity and that their power and construction delays hide the fact that they don't have much installed. He thinks this is a sign the AI build-out is close to bursting. Investors will eventually ask why companies keep buying GPUs they can't use, and demand that capex be cut. He says capex is the key variable: flat capex is a problem, and higher capex is a bigger one. Without hyperscaler spending, no one is big enough to fill the gap.

  “And at some point, investors are gonna turn on them and start demanding they pull back on CapEx.”at 17:53

Europe's economy

• Thierry Wizman · Macquarie Group

  France's rising bond yields show markets doubt it can cut deficits; protests worsen the debt spiral.

  Rising French bond yields signal that the market is less trusting of France's ability to rein in its deficits and make its debt sustainable. France's government spending relative to GDP is among the highest in the euro zone and the EU, so the market is effectively pushing for spending cuts or tax rises. The public knows about this pressure from politicians talking about spending cuts, and that is driving street protests that demand more spending. The protests hurt GDP: several French businesses expect revenue and sales losses this month, and lower GDP lowers tax revenue, which adds pressure on bonds. Wizman calls this a 'doom loop' between the bond market and the streets. It can only be resolved if the state takes a strong position, either by committing to austerity or by a political dissolution of France's ties to the EU and eurozone. Its debt is about 120% of GDP and deficits have run above 4% for years while growth stays low.

  “And that makes a modicum of sense. If you think about it, the fact that bond yields have been rising is an indication that the market is less trustful of France's ability to rein in its deficits and get to a situation where their debt is sustainable.”at 41:11

US deficit & government debt

• Thierry Wizman · Macquarie Group

  US debt is more sustainable than France's because the US still grows; deficits stay near 6-6.5% of GDP.

  US debt is about 100% of GDP, against roughly 120% for France, so France carries the larger debt load. The more important difference is growth. The US grows much faster than France, which has had low growth for a long time while running deficits above 4%. Rapid growth lets GDP outpace debt, which is the main way to shrink a debt-to-GDP ratio. Markets are comfortable with US debt: US credit default swap spreads have not widened, while French spreads have risen a lot. The US also issues debt in dollars, and the Federal Reserve can in principle support federal public finance, which France cannot do inside the euro. Wizman does not think the US is in worse shape than France, but he says the US is not free of risk. Visibility on US deficits coming down is low, so the deficit is likely to keep running at about 6% to 6.5% of GDP, which is larger than France's. Debt financing costs could eventually become a problem, though the market does not see one yet.

  “The US has much faster growth than France. France has been in a state of low growth for quite a while at the same time that it has been running high deficits in excess of 4% for quite a few years. So The US is not France in that regard.”at 44:04

US Treasuries & yields

• Thierry Wizman · Macquarie Group

  US yields are rising on heavy bond supply, including AI-buildout debt, and low domestic savings.

  Wizman's view is that the main driver of high US yields is heavy bond issuance. The government is issuing bonds, and corporations are issuing large amounts of debt to finance the AI infrastructure buildout. Too many bonds are coming to market, especially high-grade long-term issues that compete with government debt. The US savings rate is also low because people prefer consumption to saving. That leaves little domestic capital to buy the bonds, so the US relies on foreign savings to finance both the deficit and the AI infrastructure projects.

  “My view on what's driving high yields is that there's a lot of bond issuance. The government is issuing bonds. Corporations are issuing a lot of bonds because they have to finance the AI infrastructure build out.”at 44:57

Central banks outside the US

• Thierry Wizman · Macquarie Group

  The ECB's single rate suits strong eurozone members, hurting weak ones like France.

  Countries in the euro zone differ, and some are weak and need lower rates while others are strong and need higher ones. The ECB is a single central bank that can set only one interest rate for the whole continent. When rates are too high, the weak countries bear the cost. France has had weak growth for a long time, so giving monetary policy to a federated central bank is, in Wizman's view, not working in France's interest these days.

  “the European Central Bank is a one stop shop. It can only have one interest rate that prevails upon the whole continent to the detriment if it's too high of countries that are weak.”at 48:03

European politics

• Thierry Wizman · Macquarie Group

  France may stage EU disassociation via referendums, most likely if the National Rally wins power.

  Leaving the euro is not simple. There is no protocol for a country to exit a currency and revert to its old one, such as the French franc. Combining national currencies into one was much easier than undoing that. Even so, Wizman expects referendums in France that point toward a staged disassociation from Brussels and the EU, which he calls possible. That is much more likely if the National Rally wins the presidency and then a controlling share of the National Assembly.

  “I do see referendums potentially coming in France that will point towards, let's call it a staged disassociation from the strictures of Brussels and the EU. ...it's gonna be much more likely if the national rally wins the presidency and then wins a controlling interest within the national assembly.”at 49:03