{"id":205265,"date":"2026-08-28T07:47:09","date_gmt":"2026-08-28T07:47:09","guid":{"rendered":"https:\/\/www.europesays.com\/people\/205265\/"},"modified":"2026-08-28T07:47:09","modified_gmt":"2026-08-28T07:47:09","slug":"nvidia-q2-earnings-answer-the-a-i-bubble-question","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/people\/205265\/","title":{"rendered":"Nvidia Q2 Earnings Answer the A.I. Bubble Question"},"content":{"rendered":"

\t\t\t\t\"\"Nvidia CEO Jensen Huang speaks during a joint press conference with representatives of Fujitsu Ltd., FANUC Corp., YASKAWA Electric Corp. and Kawasaki Heavy Industries Ltd. on July 16, 2026, in Tokyo, Japan. The companies announced plans to explore business opportunities in physical A.I. in collaboration with the robotics industry, as well as to develop a collaborative control platform that bridges the digital and physical worlds by integrating Nvidia\u2019s open physical A.I. technologies. Getty Images<\/p>\n

While most of Silicon Valley\u2019s giants claim that their big ideas came while dwelling in basements or tinkering in garages, a diner on Berryessa Road in San Jose birthed a tech titan over a full stack of flapjacks.\u00a0<\/p>\n

Jensen Huang<\/a> founded Nvidia in a Denny\u2019s booth in 1993<\/a>, believing specialized 3D graphics accelerators would be the future of gaming. He was right, and the company became synonymous with the future of artificial intelligence. Huang still runs Nvidia<\/a>, and for the past year, a growing chorus has argued that the boom he sits at the center of is inflated.<\/p>\n

On Wednesday, after market close, Huang addressed that concern with a number: $96.2 billion in sales in three months<\/a>, up 106 percent from a year ago, beating Wall Street estimates.\u00a0Then came the guidance. Huang told investors to expect $108 billion in the current quarter, against Wall Street\u2019s $104.2 billion. For the full fiscal year ahead, Nvidia projects roughly 70 percent revenue growth<\/a>, against an analyst consensus of 44 percent. The stock rose about 8 percent overnight<\/a>.\u00a0<\/p>\n

\u2018Compute Is Revenue\u2019\u00a0<\/p>\n

Nvidia\u2019s quarterly report<\/a> has become a checkpoint for the entire A.I. economy, because nearly every dollar spent building A.I. passes through Huang\u2019s graphics processing unit (GPU) company along the way. Every Nvidia chip that runs earns money for whoever is running it.<\/p>\n

\u201cA.I. has reached its inflection point. It\u2019s doing useful work. Its tokens are productive and profitable<\/a>,\u201d Huang explained on Wednesday\u2019s call. \u201cNow, compute is revenue.\u201d <\/p>\n

The quarter\u2019s numbers are evidence. Data-center sales hit $89 billion, up 117 percent\u2014roughly 93 percent of everything Nvidia sold\u2014and Nvidia kept 75 cents of every sales dollar as gross profit. Total profit was $59.7 billion, but $7.8 billion of that (about 13 percent) was paper gain on Nvidia\u2019s equity stakes in other companies, not money earned selling chips.<\/p>\n

\u2018The Unconstrained Would Be a Lot Higher\u2019<\/p>\n

Seventy percent growth by this time next year means some $700 billion in a single year. By CNBC\u2019s math<\/a>, that is enough to pass Apple<\/a> and Alphabet<\/a> in revenue, trailing only Amazon<\/a>. And that it\u2019s the conservative version. \u201cEven though our demand is much greater than 70 percent, our supply allows us to confidently deliver 70 percent,\u201d Huang said. \u201cThe unconstrained would be a lot higher.\u201d<\/p>\n

The cap is the supply chain. \u201cMemory scarcity today is being driven in large part by the A.I. build-out itself,\u201d said Colette Kress, Nvidia\u2019s chief financial officer.<\/a> Margins will dip to roughly 71 or 72 cents on the dollar this winter before they recover. Huang can promise the rest because the order book is already full; Kress counted a \u201ccloud industry backlog now greater than $2 trillion.\u201d\u00a0<\/p>\n

Vera Rubin<\/a>, the next generation of Nvidia chips, is in full production and slated to account for a fifth of next quarter\u2019s data-center sales<\/a>. The five biggest cloud companies plan to spend nearly $800 billion this year and $1.3 trillion next. Amazon<\/a> alone signed up for 2 million more chips<\/a>. China sits at zero<\/a> in the forecast, where export controls have left it; anything from there is a bonus.<\/p>\n

\u2018We See it Differently\u2019\u00a0<\/p>\n

Those orders are exactly what Nvidia\u2019s skeptics point to, citing \u201ccircular financing.<\/a>\u201d Nvidia puts money into customers like OpenAI<\/a>, the customers buy Nvidia chips, and the loop, critics argue, makes demand look bigger than it is. The $7.8 billion in paper gains on those stakes is what that loop looks like on the income statement. \u201cAt some point, the money runs out,\u201d Boston College\u2019s Aleksandar Tomic told Al Jazeera<\/a> in July.\u00a0<\/p>\n

A second objection is about accounting rather than financing. Michael Burry<\/a> of The Big Short fame posted on X in November 2025 that the cloud giants are \u201cunderstating depreciation by $176 billion\u201d<\/a> through 2028 by stretching how long chips are supposed to last, which inflates their profits. If Burry is correct, it means Nvidia\u2019s biggest customers are buying on economics that don\u2019t hold up. A third is about the technology itself. MIT\u2019s Daron Acemoglu<\/a>, a Nobel laureate, is dubious of the whole decade;<\/a>\u00a0his numbers put A.I.\u2019s contribution to total factor productivity at less than 1 percent over ten years.<\/p>\n

Kress sidesteps the equity critique and instead reframes the circular financing issue around Nvidia cloud partnerships. \u201cWe know some will call this circular financing. We see it differently,\u201d she said Wednesday, pointing to agreements where Nvidia provides hardware in exchange for a recurring cut of cloud compute rentals rather than extending credit. \u201cWe\u2019re not making loans. In this model, we get paid twice\u2014once on the hardware sale, and again through the share of rental revenue.\u201d\u00a0<\/p>\n

As for the bigger doubt\u2014the A.I. bubble of it all<\/a>\u2014Huang\u2019s answer is payback speed. A.I. data centers, he said during the call, now recoup their costs in under a year<\/a>. Huang did not detail the utilization or pricing assumptions behind that figure.<\/p>\n

Thirty-three years ago<\/a>, Huang and two other engineers (Chris Malachowsky<\/a>, who is still fully involved with the company, and Curtis Priem<\/a>) talked chips over coffee in East San Jose. The Denny\u2019s booth now wears a plaque that says \u201cthe booth that launched a trillion-dollar company<\/a>.\u201d NVIDIA crossed the five-trillion-dollar market-value threshold last October, becoming the first company in the world to do so. As of Wednesday night<\/a>, the plaque undersells the company by four trillion.<\/p>\n

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