If the bubble of NVIDIA bursts

No one can clearly explain how much the US stock market relies on the strong stock price of NVIDIA, nor can anyone clearly explain how much NVIDIA's revenue relies on the "market" of mainland China, because from the perspective of US export controls, this market should "not exist".

However, when Eugene Cheah wrote the article "$2 H100s: How the GPU Rental Bubble Burst" on October 11, 2024, the strong stock price of NVIDIA began to loosen.

On October 17, the Chinese version of this article began to circulate; on October 21, news of the halving of H100 rental prices had already appeared in Chinese capital market media. In fact, the reduction from $8/hour to $2/hour is not just a halving, but a severe blow to the calf.

As the author repeatedly mentioned, infrastructure investment is not a terminal demand, but only an intermediate demand. Without the support of terminal demand, any infrastructure investment is unsustainable.

Over the past year, NVIDIA's graphics cards have rapidly transformed from AI computing hardware products to trade financing targets. This "demand" first came from the technological competition of G2, pushing the market demand that originally belonged to AI companies to the height of "national technological security competition". Those who sell shovels, as well as the intermediaries who finance the sale of shovels, are all making a fortune. But up to now, have all those passing the buck really struck gold?

Bubbles are part of the cycle. Just as in "The Big Short", the problem was not initially discovered in the capital markets, but from the fact that even hostesses could get loans to buy five houses. As the saying goes, when the spring river waters are warm, the ducks know it first.

The slashing of NVIDIA card rental prices signifies that as an intermediate demand of infrastructure investment, it is impossible to continue to rise "forever" without considering terminal demand, just as the housing prices in Beijing and Shanghai cannot continue to rise without considering the collapse of high-income earners' income. Once this process starts, it's a race to see who can run the fastest.

The delayed reaction of the United States may be because large institutions need to "take the first step"; or it may be because, under the guise of "export control compliance", all analyses cannot include a market that should not exist in the analysis framework.

If the bubble of NVIDIA cards bursts like this, how will people evaluate the Democratic Party and Raymondo who have expanded export controls without restrictions? Is it possible that in the last half month of the US election campaign, this bubble will really start to burst? After all, compared to export controls, Trump is more fond of tariffs.

It is worth noting that not long ago, Trump, in front of the heaviest-weight CEOs and investors in America, said that export controls are just a bargaining chip. If you cannot lift the controls, it will no longer be a bargaining chip, and he received warm applause in response.

This is a strange moment. The US economy takes the strong US stock market as a benchmark and a source of confidence, and the current US stock market is supported by the seven tech giants, with NVIDIA being the most solid. Half of NVIDIA's strength probably comes from mainland China, that is, the intermediate demand of China's technological infrastructure ultimately affects the US economy Where is the promised G2 struggle? Where are the decoupling and derisking?

In the e-commerce era, investors from across the ocean are lavishly subsidizing platforms on this side with billions, allowing the people here to enjoy low-price benefits; in the AI era, the technological infrastructure on this side is subsidizing back, supporting the US stock market, and maintaining the pension funds of the people across the ocean. It's truly a case of tit for tat, quite enjoyable.

If Nvidia's current bubble bursts like this, what will happen next? How profound will this chain reaction be? Perhaps these are the questions that analysts need to stay up late pondering.

Just recording this special moment.

Above.

Author: Mu Feng, Source: The Sun Also Rises, Original Title: "If Nvidia's Bubble Bursts"