Nvidia Wants US$500 Billion. The Market Started Asking Where the Money Comes From
Hello. The biggest story last night was Nvidia out raising money: it is working with Blackstone, BlackRock, Goldman Sachs, KKR and others on a consortium to fund AI infrastructure, for as much as US$500 billion, to be spent on AI chips, power generation and data centres.
$英伟达(NVDA)$ fell 2.86 per cent on the news.
It didn't fall because demand is short. It fell because people have started to wonder whether Nvidia is creating that demand itself: it has signed agreements worth hundreds of billions of dollars with participants across the AI ecosystem, lifting overall demand and valuations, while those counterparties themselves depend on the AI boom staying alive. That structure has a name. Circular financing. Jensen Huang answered on the day, saying "AI factories" are becoming an "investment-grade asset".
The question has changed this week. For the past few weeks the market asked whether there were enough chips to sell and whether guidance was good enough. Now it asks where the money comes from and whose revenue it is.
Optical was the worst-hit corner last night. $Coherent(COHR)$ fell 14.24 per cent, $Lumentum Holdings Inc.(LITE)$ 8.61 per cent and $Marvell Technology(MRVL)$ 4.65 per cent. $Philadelphia Semiconductor Index(SOX)$ fell 2.94 per cent and $Direxion Daily Semiconductors Bull 3x Shares(SOXL)$ dropped 7.31 per cent. Their demand assumptions sit on top of that spending, so when the source gets a question mark, the far end moves first.
In the last piece I wrote that one design change at Nvidia sank memory and lifted optics. It turned around in a day: the optical leaders collapsed, while in memory SanDisk rose 2.12 per cent and Micron fell only 1.89 per cent — and Micron's management said the AI memory shortage may run past 2027. How long a story holds depends on how far away its results day is.
Intel put the whole thing in plain sight. It announced its first public share sale since listing in 1971, initially for about US$15 billion; subscriptions came in above US$100 billion, and the company is now looking to take the deal to around US$20 billion. Pricing is expected at US$95 a share or above, about 6.5 per cent below Friday's close.
Demand ran at six or seven times the planned size, and the shares still fell 4.06 per cent. The people bidding for the new stock and the people selling the old stock are not the same people: one side buys at a discount, the other gets diluted.
The names due to report this week were also sold in advance last night. $CoreWeave, Inc.(CRWV)$e reports after the close tonight, with consensus at about US$2.61 billion of revenue and a loss of US$1.24 a share; it fell 2.74 per cent. $Lumentum(LITE)$ is tonight as well, on about US$1.01 billion. $NEBIUS(NBIS)$ comes pre-market tomorrow, on about US$580 million and a loss of US$0.693 a share; it fell 2.05 per cent. $Coherent(COHR)$ is Wednesday after the close, on about US$2.03 billion. $Applied Materials(AMAT)$ is Thursday after the close, on about US$9.18 billion and earnings of US$3.45 a share; it fell 3.16 per cent. Only $SUPER MICRO COMPUTER INC(SMCI)$ went the other way, up 1.06 per cent, and it reports tonight too, on about US$11.78 billion and earnings of US$0.98 a share.
Two of those sit on exactly the same question. $CoreWeave, Inc.(CRWV)$ and $NEBIUS(NBIS)$ are both highly geared compute plays, and last week Nebius was hit on funding costs before Michael Burry was disclosed to have opened a short. So what the market wants from these two results isn't the revenue growth rate. It is whether they can still borrow cheaply.
The ones that have already reported set the tone. $Rocket Lab USA, Inc.(RKLB)$'s second-quarter revenue was US$234 million, up 62 per cent and ahead of expectations; the loss of US$0.08 a share missed. It fell 3.37 per cent in the session and another 6.92 per cent after hours. AST SpaceMobile fell 4.42 per cent the same day. $SpaceX(SPCX)$, meanwhile, has put together three up days on the back of its cleared float, rising another 4.23 per cent last night — the one name in the sector with no paper due.
Rates quietly turned. On Friday, payrolls had pushed the odds of a September rate rise down to about 44 per cent; last night they were back to about 54 per cent. Oil rose more than 5 per cent on the day with WTI back above US$82 a barrel, the 10-year Treasury yield rose 6 basis points to 4.70 per cent, and Cleveland Fed president Hammack said more than one rate rise may be needed to get inflation back to target.
One thing doesn't add up. Part of the case for gold and silver last week was oil falling and inflation worries easing. Now oil has jumped, rate-rise odds are back, and the metals are moving faster than before — gold futures rose 3.32 per cent to US$4,484 last night, clearing US$4,400, and silver rose 4.70 per cent to US$66.31. So what they are buying is no longer simply lower rates. What it is instead, I can't yet tell.
The indices nearly pretended not to notice: $S&P 500(.SPX)$ fell 0.06 per cent, $Dow Jones(.DJI)$ 0.11 per cent and $NASDAQ(.IXIC)$ Composite 0.32 per cent. A large piece of semiconductors caved in, and other places held the index up — the energy sector ETF rose 4.68 per cent, the biotech index hit a record and Chinese names were strong. $Apple(AAPL)$ was the weakest of the mega-caps, down 1.53 per cent after a downgrade.
July CPI arrives on Wednesday at 20:30 Singapore time, with the Bloomberg survey looking for a 0.1 per cent monthly rise, against a 0.4 per cent fall in June.
The papers start coming in tonight. This time the market isn't asking how much was sold. It is asking where the money comes from.
The above is personal analysis, not investment advice.
💬 【Talking Point】
That US$500 billion question hit optical hardest — Coherent fell 14% before it had even reported. Do you read that as the market moving early, or getting it wrong?
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