Nvidia Corp’s stellar fourth-quarter results have sent ripples of excitement through Wall Street. Yet, amidst the celebrations, a specter of doubt was raised by a seasoned fund manager. Short-seller Jim Chanos, famed for his Enron collapse prediction, sounded a cautionary note about Nvidia’s possibly excessive reliance on the rest of the Magnificent 7 companies.
Nvidia’s Dependency on Mag 7: Chanos’ concerns were sparked by social media chatter about the sustainability of GPU spending by the Magnificent 7 companies. The dialogue weaved around the speculation that a significant portion of Nvidia’s revenue was contributed by one of these seven companies directly procuring chips – suggested to be Meta Platforms or Microsoft. The question posed was whether these companies would maintain their GPU spending, especially in light of the significant percentage it represents of their total outlay.
Chanos interjected with his comment: “Just a friendly reminder that most of Mag 7 darling Nvidia’s operating cash flow is actually capex from other Mag 7 darlings.”
Nvidia’s remarkable growth since 2023, at the commencement of the AI revolution, has mesmerized investors and analysts. However, talk has begun to simmer about the longevity of Nvidia’s success. Some believe that the AI boom will persist for three to five more years, while others caution about a potentially significant downturn when it finally arrives.
In premarket trading on Friday, Nvidia rose 2.03% to $801.30, according to Benzinga Pro data.
