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Free newsletter: Despite stories about gigawatts of capacity coming online, I've found that the vast majority of announced data centers have yet to be built, with many running far behind schedule. I now believe NVIDIA is warehousing at least a million GPUs. www.wheresyoured.at/where-are-al...

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Ed, reading thru seems to imply that Nvidia is simultaneously selling chips before they're made and also "warehousing" (by whom?) brand new, unopened GPUs. Aside from the fact that these two narratives directly contradict each other, wouldn't those have to show up somewhere on the balance sheet?

bc it seems to me the real issue remains that: nvda is using its piles of cash and large equity base to fund startups and other tech firms to buy more GPUs for projects that have little hope of capital returns, and the market puts an irrational multiple on the forward backlog

This, of course, is not sustainable if the firms they're investing in don't turn a profit (which is likely!) but the market already knows this and just doesn't care yet

I’m not saying it is or isn’t either way, but i can imagine ways in which they recognize the revenue without fully “delivering them”. Tesla has used some kind of BS “financially delivered” standard for some time now.

I'm able to track the warehousing claim but don't quite see the selling unmade chips, besides the preorder campaign statement. I can't speak to what Ed thought, but the implication is that (if Nvidia sold them but that they couldn't be installed they'd be capital assets on the purchasers' books?

I think we've def seen examples of proactive purchases that will be accepted prior to data center startup but that's normal/expected given stated demand from customers. If the chips don't have a path to get plugged in then this is channel stuffing and will fall apart in no time

Mmm, makes sense. I think that channel stuffing is the broader idea, though the term that the article uses ("bill-and-hold") seems like a very specific form where NVDA warehouses the asset after sale to the customer. I don't see much evidence that this specific "bill-and-hold" concept is being used?

I am able to imagine a scenario where both the buyer and seller want to make it appear like the sale was completely finalized so that Nvidia can recognize the revenue, and the purchaser can look like they are “hyperscaling” even though they don’t necessarily have a place to install them at present

I mean if it's happening on both ends at scale that's (1) almost entirely unprecedented and (2) sure to blow up very very quickly

I also heard today that some data centers are repurposing old jet engines to operate as gas turbines. They are probably even less efficient than a simple cycle turbine. The whole thing has gotten out of hand.

Incredible work on this! Almost none of the companies mentioned in your article have the CapEx available to support AI/DC growth. The energy investment alone are super long paybacks that would never fit into a NPV or IRR metrics for a go decision.

I know companies like Siemens for example have started up shell investments companies. Theirs is named Calibrant Energy. This shell takes the risk off Siemens finances. When project begins and complete Siemens recs all revenue. Then benefits through the investment shell as the asset pays back.