Nvidia agreed to buy CoreWeave’s unsold computing power through 2032.
Do you have any idea what that deal is? CoreWeave, buy as much as you want, and if there’s extra capacity, we’ll buy it ourselves.
The order CoreWeave disclosed started at $6.3 billion. Circle of life trade. Good luck with that.
Nvidia isn’t about GPUs right now. Nvidia is the trade. This is financial engineering at its best.
The Nvidia Bank
They built the Nvidia bank, so you didn’t need money to be a customer. You come to Nvidia, you say “more, please,” and they find a way.
Look at the latest quarterly filing. Nvidia’s off-balance-sheet guarantees and commitments jumped to about $530 billion, up from $184 billion the quarter before.
Jensen’s a smart guy, but the deals were his real genius. He brought private equity in to back firms like CoreWeave, so they were able to borrow under Nvidia’s umbrella and turn around and buy Nvidia’s stuff. That innovation walked out the door with him.
Now the CFO is running the company, and I’m not picking on her. But I’m not sure she can get back out on the road and bring the kind of capital to the table that Jensen would.
She’s going to be getting calls from people she doesn’t even know are in deals. And if I’m a private equity firm that’s been lending hundreds of billions of dollars into this, I may pull my credit facility entirely.
I want to be clear about one thing. I don’t think this is an Enron, because Enron was outright fraud, and this isn’t fraud.
Everybody wanted a piece of the action, and they brought everybody in on it. But that doesn’t mean it can’t collapse.
Dead Money
Nvidia can bounce. Don’t get me wrong. But not only do I think it’s dead money, I think it’s incredibly dangerous.
I think Nvidia is the epicenter of the AI circle trade.
The moment some of that paper starts to go bad, whether that’s a CoreWeave stumbling or a lender getting nervous, a lot of that risk lands back on Nvidia. And there’s no Jensen in the room to sell his way out of it.
The bigger trade, I think, is in the broader market. When this unwinds, it can drag down names like Google and Microsoft too. How long before the market figures that out? It may take days, or it may take weeks.
And if you think you’re out of this trade, go pull up the top 10 holdings of your S&P 500 or Nasdaq-100 fund.
Nvidia sits near the top of both, so you probably own more of it than you think. Decide now how much of that you’re comfortable carrying.
To your success,
Don Kaufman
