Once again I am reminded of the circular nature of money flowing around in this economy. Michael Burry even commented on this, citing it as rhyming like other economic failures previously.
I imagine it's a similar story. If Intel fails, Nvidia loses sales and this investment.
This is the reason we moved to using money instead of a barter system.
If one succeeds, and grows 10-100x, you are profitable. If a few succeed, you double your market cap.
I specifically meant this circular investment idea is medium risk.
Of course Nvidia can tank if sales decline.
And the deals Nvidia are making are different from all of those. Buying OpenAI stock so that OpenAI can buy Nvidia's products is very risky. Buying the management team and IP of Groq is a very weirdly structured deal. What was the benefit to Groq? What is the purpose of this Intel deal?
Its called the velocity of money, its a thing see: https://en.wikipedia.org/wiki/Velocity_of_money
The problem is that there is all this capital and no place to put it, so yes it seems circular, but some of that is to be expected.
As for Burry, he recently called out the changes to how the big players are amortizing their capital expenses for all these data center build outs. He is correct in calling it out, but he's getting the wrong signal from it. Mores law died a long time ago, and now were basically hitting multiple walls at the same time: Node scaling at the chip fabs, power and cooling in the data center, and just more linear growth from product (because of all three factors).
Go back to 2008 ish time period. There were a lot of data centers that hit the wall with availability of power and cooling and they were hard problems to solve then. The solution was not to upgrade rather to "build new", and were seeing a lot of the same types of issues today.
Nvidia has unmaintainable margins, the memory manufacturing side is now in on the grift too... They are sucking up the profit while they can because the dip is going to be BRUTAL (likely a boon to consumers but neither here nor there).