David Lin on $NVDA (Nov 6, 2026)
NVDA's main risk is circular financing: about 10 to 15% of sales likely come from neocloud customers; if cash flow from big names stops, the whole trade falls apart. Supporting the largest neoclouds would help NVDA, but Jensen Huang likely won't extend himself too far too soon.
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On Thursday alone, Nvidia plunged more than 9%
Um but then in there was an article about Nvidia that was saying you might have to um buy old um you know telephone uh wareh you know warehouses and offices uh and convert them into data centers because it's going to be harder to get approval in blue states.
And the question is how much longer can this sustain because even Elon Musk and Jenza Huang are warning that capital is drying up.
Nvidia needs to find more buyers. Now, it's not that they won't find more buyers.
It is and Nvidia is at the center.
Could Nvidia possibly give some of these Neocloud companies, in other words, their clients, maybe a a loan, so to speak, in the in the sense that they could possibly have an extension on payment.
In other words, create an obligation to Nvidia whereby I don't know, maybe they sell at a discount or just don't pay me for a while until you start earning a return on capital.
I think they can, but you know, with Nvidia being down 8% today, I think Jensen is thinking twice. I mean, he doesn't have a lot of debt on the balance sheet. He has about 38 billion on the balance sheet.
He does have some offbalance sheet commitments and he does own some stakes in some illquid companies, but I think he's too smart to overextend himself.
Um, I think he will in certain cases. I've actually done some back of the envelope math where I've calculated about 10 to 15% of Nvidia's sales are probably coming from Neocloud customers, which is actually very material.
Now, if he were to sport the biggest ones like Cororeweave and give them a lifeline, it would be very good for his own business. I just don't think he wants to extend himself too far too soon.
what we you know what we've seen with Enthropic is like AVGO Broadcom will invest in Enthropic and Entropic will then agree to buy um AS6 from uh from Broadcom and it's the circular financing goes beyond Nvidia and I think that's one of the main risks that's why hedge funds are also scared because if the cash flow from these big names like Broadcom and Nvidia you know stops because you know they don't want to overlever then this whole trade kind of fall falls apart.
Microsoft buys $1 of GPUs from Nvidia. Nvidia takes the $1 as revenue and it achieves a 75% gross margin. So it takes keeps 75% after SGNA. you know that 75% less SGNA goes to the bottom of the balance sheet and Nvidia reports you know let's say 50 cents of EPS that's huge right that half of you know the um growth in earnings this year has been because of hyperscalers and semiconductors right so let's say you know that's true so it's really like 66 cents of the $1 flows to IBITA and fix 56 cents flows to the bottom line that's what's happened in the last 12 months for Nvidia
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