Huang Dismisses Circular Financing Worries as Nvidia Posts Record Revenue
Nvidia CEO Jensen Huang has dismissed concerns that the company is propping up its own sales through circular financing. The practice involves Nvidia investing in AI startups or cloud computing companies, which then use the capital to buy Nvidia GPUs, generating revenue for the company.
Huang pointed out that the $99 billion of equity investments and $25 billion in future commitments disclosed by Nvidia are small relative to the business it generates. He claimed that Nvidia has unusually strong visibility into the projects it supports and that the company is not taking on significant risks.
The CEO also highlighted a $100 billion contract backlog, calling it 'real stuff.' However, critics such as Michael Burry and Jim Chanos have expressed concerns about the circular financing model, arguing that it inflates reported profits by understating depreciation costs. They also warn of a 'depreciation time bomb' at companies like CoreWeave and Oracle.
Nvidia's underlying business continues to surge, with second-quarter revenue jumping 106% year over year to $96.2 billion. The company generated $303 billion in revenue over the last 12 months, with gross margins near 75%. Huang reiterated his forecast that AI infrastructure spending could reach $3 trillion to $4 trillion by 2030.