NVDA profits from AI capex cycle; however, revenue is increasingly self-guaranteed via balance sheet support for customers, posing systemic risk if investor sentiment shifts away from AI firms.

Is it a coincidence that when Google and SpaceX announced they raised $ 160 billion, more than that, it's like 186, right? But over $160 billion that all of a sudden Nvidia announces five minutes into well the earnings call started you know a little bit after two.

But is it a coincidence that they announced an increase of their projected growth for next year from 48% growth to 70% growth coincidentally equaling a $160 billion increase in backlog.

Think about what I just said. Just Google and SpaceX happen to raise enough to completely justify the $160 billion increase alone that Nvidia forecast in their guidance. Pretty remarkable.

And the markets loved it. They ate it up. Why? Because it's more growth than we thought. And the more we can sort of expand the tale of the AI spending, the longer hardware rallies can actually continue.

But we know that money is just getting recycled right back into hardware like Nvidia. And so sure enough, here we are. Oh, $160 billion increase in backlog. And when that 70% increase was announced, guess what happened?

The stock literally went from negative on the actual earnings release to, oh my gosh, what? You guys are forecasting a 70% increase in growth next year versus just the 48% we were expecting. Boom. The stock shot up.

But you should already know where Nvidia went. Of course, it went straight to the 227 line. Now, you might be wondering, Kevin, did you just place that line there? No. And that's the beauty about these lines is those of you who have been here, you know, damn, look at that pre-market 227 reject.

That is going to be the test for today. That is going to be the test to see if we can finally get Nvidia to rerate higher because honestly, it does justify a higher valuation.

So the sucketing led to an increase in hardware spend at Nvidia and it's likely going to increase hardware spend at other companies as well. Duh. We already expected that the 70% might actually be a floor because Nvidia sees this as a supply constrained outlook that there's so much of a backlog greater than $2 trillion that they could actually potentially grow by double if they had enough supply.

Uh and they say that customer forecasts for you know Nvidia customers their forecasts point to Nvidia's growth potentially doubling next year. That would be 100% growth.

The great sucking of OpenAI and Anthropic, those are still coming, which also continue to spend money on Nvidia.

Nearly 20 companies including cursor, SpaceX, Figma, and together AI now exceed 1 billion in annualized recurring annual uh well annualized run rate for for recurring revenue. This is really Nvidia trying to justify the spend that's going on.

Enscale just signed a $45 billion contract for six years with Anthropic. Enscale was actually mentioned right here by Jensen.

That doesn't necessarily matter to Nvidia. Nobody at Nvidia cares how Elon justifies the spending. So, while Nvidia is the funnel collecting the money from the sucketing, you have to realize some of the economics that are underwriting future compute deals that are going into the spending are not lining up.

Jensen says the Frontier Labs have fantastic margins. Wait a second. The only way they have fantastic margins is if you go to Anthropic, and we'll see when we get the actual S1, but Anthropic adds back in their training costs.

remember the OpenAI facility that we talked about yesterday in the Nvidia video that I made where they're guaranteeing $15 billion. Okay, $105 billion is the Nvidia guarantee.

If I take 1.5 million GPUs and I multiply it by about a cost of $55,000 per GPU, what do I get? I get $82.5 billion. That one deal that Nvidia guaranteed with $105 billion of Nvidia's balance sheet doesn't even show up on the balance sheet, right?

But that $105 billion of guarantee basically got them $82.5 billion of data center revenue just in GPUs.

Okay, but wait a minute. That contract could actually expand. That contract could expand to be a $198 billion guarantee if the same economics are used in the future.

if you looked at their last earnings report, they just reported $89 billion of data center revenue. Wait a minute. So, in one quarter, Nvidia reported $89 billion of data center revenue, but they also just guaranteed a project that expects to basically give them nearly a full quarter of revenue because of their guarantee.

So they've almost engineered a full quarter of revenue, data center revenue from one customer, open AAI with their balance sheet might.

Now look, I'm not bearish Nvidia. I think Nvidia is going to profit a lot from SpaceX and Google and Anthropic throwing a lot of money at compute.

And we are now generating with one deal with OpenAI about a quarter of the company's entire data center revenue that is completely guaranteed by Nvidia itself.

This keeps going. Nvidia keeps winning as long as these companies can keep sucking and they will. They don't care. They will keep sucking.

What stops the sucking is probably an AI company like Anthropic going public and then their stock going down and investors saying that's it. we don't like you anymore. We're not going to support the suck anymore. That's when you get concerned about Nvidia.