🔴 Half a trillion dollars in revenue by the end of 2026 means NVDA is playing with fire.
4 companies are buying 61% of NVDA chips.
These companies have to utilize those millions of chips and train models before offering real services to consumers.
But to utilize those chips for training, far more is required than just chips. They need power supply, cooling systems, warehouse buildings, and logistics.
In the USA, there is a shortage of all these prerequisites.
So if the companies fail to put those chips to work, how will they pay NVDA?
$500 billion in chip sales means the datacenter companies (Amazon, Google, Meta, XAI) need to manage another $700 billion to run the datacenters with those chips.
Because GPUs account for only 40% of the total datacenter project, the other 60% is needed to build infrastructure and power supply systems.
Where will that money come from?
The free cash flow of the 4 companies is not enough, so they will have to issue Debt.
Oracle’s AI debt is trading at a 9% discount, meaning all these companies will face high borrowing costs.
But without developing real products, how will these companies pay off the debt?
These datacenter companies are driving up energy prices. People are starting to protest against hyperscalers for increasing energy costs.
Soon the American Military will have to guard those Datacenters.
By saying all the bad things, let’s say something good:
70% of office work is just writing emails, making documents, working with Excel, and analyzing data. Within a year or two, AI will be able to do all of this with high accuracy and much faster.
So productivity will increase significantly.
But again, that leads to layoffs and reduced hiring, because AI can do most of the work and almost all entry-level tasks. So why keep excessive headcount?
And right now, in the American economy there is nothing to grow without AI.
So whether it goes good or bad, the Fed will ultimately have to intervene and save either the people losing jobs or the Datacenter companies from going bankrupt.
Meanwhile, NVDA will generate a trillion dollars of revenue and half a trillion dollars of profit.