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Nvidia’s Narrative Caught Between Massive Bears and Dumb Bulls

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Nvidia’s narrative took a serious hit this week as a consequence of a number of elements together with the emergence of a reputable rival, OpenAI’s struggles, and a commerce warfare pincer that has them caught between Trump and China.

Is a Authorities Backstop the Bull Case?

Nvidia’s narrative which it kicked off with the launch of Ampere structure and A100 chip in 2020, subsumed any competing story-lines within the post-pandemic American inventory markets in 2022 and engulfed all the American financial system underneath Trump.

Nvida’s narrative that Giant Language Fashions (LLMs) like OpenAI’s ChatGPT, Anthropic’s Claude, and Google’s Gemini ARE the way forward for expertise and the worldwide financial system has made them the world’s largest company by market cap.

The Trump administration could also be all-in with Nvidia’s narrative and could also be signaling its willingness to backstop the trade to forestall the AI bubble popping.

Paypal mafioso and Trump tech czar David Sacks had beforehand indicated the federal government wouldn’t be backstopping OpenAI earlier this month.

I argued elsewhere that Sacks’ tweet contributed to the downturn in AI shares we noticed within the first weeks of this month.

However on the twenty fourth, Sacks appeared to sign a change in his (very influential) considering, in response to a Wall Avenue Journal piece headlined, “How the U.S. Economic system Grew to become Hooked on AI Spending and subtitled, “Development has been bolstered by data-center funding and stock-market wealth. A reversal might elevate the chance of recession.”

Paired with the White Home’s govt order titled “Launching the Genesis Mission” launched the identical day, many took this as bullish information for Nvidia’s narrative and the bigger AI bubble.

The closest factor I might discover to an motion phrase within the EO was this promise to:

…construct an built-in AI platform to harness Federal scientific datasets — the world’s largest assortment of such datasets, developed over many years of Federal investments — to coach scientific basis fashions and create AI brokers to check new hypotheses, automate analysis workflows, and speed up scientific breakthroughs.

Critics of the Nvidia narrative will in fact level out that when a authorities backstop is the bull case, the bubble is in hassle.

Possibly that’s why the a handful of naysayers who’ve been preventing the tide, at the moment are being joined by some main traders who’re placing their cash the place the critics’ keyboards have been.

Workforce Bear Beefs Up

Pioneering Nvidia bears like AI scientist Gary Marcus and journalist Ed Zitron have now been joined by notable traders together with the “Massive Quick” contrarian Michael Burry and billionaire Stanley “I killed the Pound” Druckenmiller who bought all 214,060 of his funds’ Nvidia shares.

Marcus and Zitron stay opinion leaders within the area, nevertheless.

Marcus is at the moment coping with the emergence of a category of rival AI specialists who’ve been on the AGI (Synthetic Normal Intelligence) bandwagon and at the moment are getting off.

AGI is the patent nonsense that LLMs are only a few months away from creating super-intelligent, self-replicating machines.

Naturally, perception in AGI has been the standard knowledge in Silicon Vally for the final couple of years and continues to be an enormous half of the bulls’ case for the Nvidia narrative.

Marcus has taken numerous warmth for calling bullshit on LLMs because the street to AGI from the get go, and is now expressing combined emotions concerning the large names who’re becoming a member of him on the important aspect.

These names embody Meta’s Chief AI Scientist Yann LeCun and OpenAI co-founder Ilya Sutskever.

As for Ed Zitron, his newest “The Hater’s Information To NVIDIA” is effectively well worth the subscription worth and the estimated 54 minute studying time.

It contains a wonderful, concise rationalization of why Nvidia has grow to be the hero of the Nvidia narrative which has reshaped the U.S. financial system:

Again in 2006, NVIDIA launched CUDA, a software program layer that allows you to run (some) software program on (particularly) NVIDIA graphics playing cards, and over time this has grown into an enormous benefit for the corporate.

The factor is, GPUs are nice for parallel processing – basically spreading a activity throughout a number of, by which I imply 1000’s, of processor cores on the identical time – which implies that sure duties run quicker than they’d on, say, a CPU. Whereas not each activity advantages from parallel processing, or from having a number of thousand cores out there on the identical time, the type of math that underpins LLMs is one such instance.

CUDA is proprietary to NVIDIA, and whereas there are alternate options (each closed- and open-source), none of them have the identical maturity and breadth. Pair that with the truth that Nvidia’s been targeted on the info heart marketplace for longer than, say, AMD, and it’s simple to know why it makes a lot cash. There actually isn’t anybody who can do the identical factor as NVIDIA, each by way of software program and {hardware}, and definitely not on the scale essential to feed the hungry tech companies that demand these GPUs.

Anyway, again in 2019 NVIDIA acquired an organization referred to as Mellanox for $6.9 billion, beating off different would-be suitors, together with Microsoft and Intel. Mellanox was a producer of high-performance networking gear, and this acquisition would give NVIDIA a stronger worth proposition for information heart prospects. It wished to promote GPUs — numerous them — to information heart prospects, and now it might additionally promote the high-speed networking expertise required to make them work in tandem.

That is related as a result of it created the phrases underneath which NVIDIA might begin promoting billions (and finally tens of billions) of specialised GPUs for AI workloads.
…
As a result of no one else has actually caught up with CUDA, NVIDIA has a practical monopoly…

NVIDIA has been printing cash, quarter after quarter, going from a meager $7.192 billion in whole income within the third (calendar 12 months) quarter of 2023 to an astonishing $50 billion in simply information heart income (that’s the place the GPUs are) in its most up-to-date quarter, for a complete of $57 billion in income, and the corporate initiatives to make $63 billion to $67 billion within the subsequent quarter.

However by no means concern, Ziton additionally places a stake by means of the guts of the Nvidia narrative over the course of a number of thousand phrases. Right here’s a key level:

NVIDIA makes a lot cash, and it makes it from a a lot smaller buyer base than most corporations, as a result of there are solely so many entities that may purchase 1000’s of chips that value $50,000 or extra every.

Zitron cites pseudonymous finance poster “Simply Dario” as somebody who’s supplied key insights into the workings of Nvidia and Dario’s newest piece on the corporate is value studying in full, however the TL;DR rationalization of Dario’s position within the bigger Nvidia narrative wars could be grasped from glancing at these tweets about whether or not or not Enron is a legitimate comparability level for Nvidia:

I ought to be aware that this gorgeous a lot unknown (and I think AI-using Substack) author Shanaka Anslem Perera obtained the credit score from Yahoo Finance with triggering Nvidia’s now notorious “we’re not Enron” memo.

Yahoo additionally quoted “Jim Chanos, who is known for predicting the autumn of Enron, (who) thinks the comparability between Nvidia and Lucent bears weight.”

“They’re [Nvidia is] placing cash into money-losing corporations to ensure that these corporations to order their chips,” Chanos stated.

As for “Massive Quick” Burry, his new Substack is a bit wealthy for my blood, though critical traders will possible discover it a discount, however his newest contribution to Nvidia’s narrative entails evaluating Nvidia to Cisco earlier than the dot.com bust:

This provides to Burry’s earlier X.com put up alleging that AI trade accounting practices of “understating depreciation by extending helpful lifetime of belongings artificially boosts earnings (are) one of many extra widespread frauds of the fashionable period.”

And naturally, Burry’s near a billion-dollar guess towards Nvidia’s narrative has impacted our story as effectively.

There’s additionally been a spate of dangerous information for Nvidia within the tech enterprise press.

Two Extra Issues for the Nvidia Narrative

Two headlines from The Info neatly summarize the most recent points Nvidia is dealing with within the market, sadly, it’s an costly subscription solely publication and we’ll should look elsewhere for explanations:

  • Google Additional Encroaches on Nvidia’s Turf With New AI Chip Push
    Summarized by Reuters as “Meta Platforms is in talks with Google to spend billions of {dollars} on the Alphabet firm’s chips to be used in its information facilities ranging from 2027, The Info reported, a transfer that will solid Google as a critical rival to semiconductor large Nvidia.

    The talks additionally contain Meta renting chips from Google Cloud as early as subsequent 12 months and are a part of Google’s broader push to get prospects to undertake its tensor processing items (TPUs) – used for AI workloads – in their very own information facilities, the report stated, citing folks concerned within the talks.”

    Nvidia responded with an announcement that’s getting mocked on-line.

  • China Is Slowly however Certainly Breaking Free From Nvidia
    Summarized by Reuters as “Chinese language regulators have barred TikTok-owner ByteDance from deploying Nvidia (NVDA) chips in new information facilities, The Info reported ​on Wednesday, citing two firm workers.

    ByteDance purchased extra Nvidia chips than ‌another Chinese language agency in 2025 because it raced to safe computing energy for its billion-plus ‌customers amid issues Washington might curb provide, in line with the report.

    The reported ban underscores Beijing’s efforts to cut back reliance on U.S. expertise, a marketing campaign that has intensified as Washington tightens curbs on exports of superior semiconductors to China.

The Mid-Wits Weigh In

No debate in 2025 can be full with out one of many Abundance bros weighing in.

Naturally Ezra Klein’s “Abundance” co-author Derek Thomas (co-writing with Understanding AI founder Timothy B. Lee is coming down within the center with “Six causes to assume there’s an AI bubble — and 6 causes to not” and shrewdly saves the bull case for its paying prospects. Discuss figuring out your viewers.

The Actual Bulls Embody Jim Cramer and AGI Crazytown’s Most interesting

However I’ll go away the actual bull case to the legendary CNBC commentator Jim Cramer (I ought to be aware that the Inverse Jim Cramer ETF has been getting killed currently).

His case boils all the way down to progress:

I’m an enormous believer in progress shares, and …progress shares are what attracts me to the hyperscalers for my journey belief. Now we personal many, many shares from different universes drug shares, aerospace supplies, information heart builders. They’ve long run progress tales, however they’re not turbocharged with the sources of those gigantic corporations.

That’s what at all times brings me again to the Magazine-7. These shares are distinguished due to their success. The businesses they signify have bountiful income, which is why they might rise to their lofty trillionaire standing within the first place. It’s why I don’t kick them out after they’re down the truth is. Or the truth is, it’s why I’d purchase them for the belief.

However the way more entertaining bull case for the Nvidia narrative is made by Utopia believers like Tomas Pueyo who helps his 119,000 Substack subscribers put together for a post-scarcity Utopia led to by “super-intelligence.”

Admittedly, I’ve an instantaneous and utter disdain for anybody pitching imminent Utopia however a few gummies and Pueyo’s stuff turns into fairly entertaining. Right here’s a style from his newest, “AI: How Do We Keep away from Societal Collapse and Construct a Utopia?“:

Within the earlier article, we noticed that we’ll finally dwell in a utopia, a world of full abundance and with out the conflicts over scarce sources which have plagued humanity all through historical past.

Effectively then.

However lest readers assume Mr. Pueyo isn’t involved with the obstacles in our path, there’s extra:

intelligence is not going to be infinite till there’s infinite vitality and infinite compute, which will even want loads of uncooked supplies and land. So the shortage of intelligence won’t even be fully eradicated till extra of those inputs are sufficiently ample.

Assuming AIs nonetheless serve people, how will they prioritize? They’ll want a sign of what issues most to people. How will people convey that? By way of cash.

…

So it’s impossible that we’re going to eliminate capitalism. We want the value sign to convey the optimum allocation of capital.

However in that world, the place people usually are not working anymore as a result of they’ve been totally automated by AIs extra clever than themselves, how do you determine how a lot cash every particular person ought to have?

I’ll go away it as much as readers who’re actually dying to know simply what number of angels are dancing on the highest of his pinhead to learn extra of his work.

Simply bear in mind that the Nvidia narrative bears are up towards an entire lot of people that actually actually actually wish to imagine and are clapping as exhausting as they will to maintain Tinkerbell alive the AI bubble inflated.

Sadly for the bulls, and Nvidia’s narrative. AI slop is having very actual world impacts. The sort folks discover.

Will People take consolation of their 401K wealth impact if they will’t even go into a cheerful turkey coma after Thanksgiving dinner as a result of Nvidia’s narrative led to AI slop getting served to the desk?

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