The cycle of the tech industry in the United States: NVIDIA's cash flow equals the capital expenditures of other tech giants.

NVIDIA is hailed as the "most important stock on Earth" due to its outstanding performance. However, renowned short seller Jim Chanos points out that in the AI feast, NVIDIA's impressive performance comes at a huge cost for other tech giants: while NVIDIA's profits grow, the costs for other tech giants are increasing.

On Thursday, Jim Chanos posted on X platform:

"Just a friendly reminder, NVIDIA's cash flow comes from the capital expenditures of other tech giants." "For NVIDIA, every chip sold directly increases its revenue and profit on the financial statements, so revenue and profit can be reflected immediately." "However, for other tech giants, these capitalized costs are not immediately expensed on the income statement but capitalized on the balance sheet, and amortized or depreciated over their useful lives. This means that the costs of these chips as long-term assets will gradually be recorded as financial costs over the next few years, rather than immediately impacting profits. However, these huge costs will reduce the profits of tech giants in the coming years." "In the short term, and tech giants have extended the depreciation period of their data center equipment (like NVIDIA), reducing the annual depreciation expense recorded on the income statement, which can boost reported profits in the short term."

Chanos emphasizes that NVIDIA is earning a lot of cash, which can be used for operations, expansion, acquisitions, or returning to shareholders. Meanwhile, its large tech customers are spending a fortune on buying chips, whose value will gradually decrease over time. Moreover, NVIDIA's rapid expansion may be eroding the growth opportunities and market share of large tech companies.

Meanwhile, digging into NVIDIA's earnings report released last Wednesday, it can be seen that the company's top customer contributed 20% of revenue, about $12 billion, while the second-largest customer contributed 10% of revenue (in the nine months ending last October), about $3.9 billion.

According to media reports, considering the significant investments by Microsoft and Meta in the AI and metaverse fields, these two companies are likely the two largest customers of NVIDIA. Therefore, these two companies have made substantial capital expenditures to drive NVIDIA's astronomical performance growth.

Currently, with the development of AI technology and the expanding scope of applications, the demand for high-performance computing capabilities is continuously increasing. NVIDIA's GPUs have become the preferred hardware for AI and deep learning tasks due to their efficient processing power. As a result, NVIDIA's customers are rushing to purchase its chips, creating massive revenue for NVIDIA. Looking ahead, the situation may undergo changes. The media pointed out that the competition in AI is intensifying, and tech giants like Microsoft and Meta may reevaluate their need for chips, reducing purchases from NVIDIA, or shifting towards manufacturing their own chips or seeking other suppliers. Therefore, NVIDIA's current profit growth momentum may be hindered.