Nvidia Financial Scandal Threatens the US AI Market

Nvidia has found itself at the center of a massive financial scandal capable of bursting the entire US AI bubble. As reported by the WSJ, the company's financial statements reveal that Jensen Huang has pushed the organization into such a crisis that exiting it could lead to Nvidia's liquidation.

The startup support scheme

It all started with a business model involving AI startups. Nvidia provided them with billion-dollar credit guarantees, which they used to build data centers and purchase chips. If a company failed to utilize its capacity, Nvidia promised to buy it out, just so the startups would continue buying their chips. As a result, Nvidia acted simultaneously as an investor, creditor, supplier, and backup buyer. This helped inflate the company's valuation.

Collapse of obligations

However, everything came to an end when major AI organizations refused to switch to their own chips, despite Nvidia having signed strict contracts with suppliers and committed to purchasing components from them worth $279 billion. Total obligations exceeded $530 billion, several times more than the annual net profit over several years.

At any moment, these contracts could turn into unbearable debt. The termination of this scheme would lead to bankruptcy for all startups and companies dependent on Nvidia, not to mention that shares of the organization itself and all American big tech firms would plummet.

Market consequences