Post

Ed, reading thru seems to imply that Nvidia is simultaneously selling chips before they're made and also "warehousing" (by whom?) brand new, unopened GPUs. Aside from the fact that these two narratives directly contradict each other, wouldn't those have to show up somewhere on the balance sheet?

I'm able to track the warehousing claim but don't quite see the selling unmade chips, besides the preorder campaign statement. I can't speak to what Ed thought, but the implication is that (if Nvidia sold them but that they couldn't be installed they'd be capital assets on the purchasers' books?

I am able to imagine a scenario where both the buyer and seller want to make it appear like the sale was completely finalized so that Nvidia can recognize the revenue, and the purchaser can look like they are “hyperscaling” even though they don’t necessarily have a place to install them at present

I mean if it's happening on both ends at scale that's (1) almost entirely unprecedented and (2) sure to blow up very very quickly

12/5/26, 10:41 pm0 reposts3 likes

the cash flows would rapidly diverge from the income statement if there wasn't a bunch of outside money flowing in and we simply don't see that happening yet

In my head I was thinking you “buy” the chips from bvidia, fully pay for them, and just don’t *really* take physical delivery of them and some scheme is devised to move them off of Nvidia’s balance sheet so that the inventory build ties out.

Maybe that’s a third party company, maybe they’re sitting in your buildings but you just mark them as “the owner of these gpus is company X” and you take them off your balance sheet.

Does it actually matter how the physical asset is handled, though? Ed's argument is that datacenter installations don't add up to sales, but accepting that premise that doesn't entail anything about where the GPUs actually are. An unpowered rack can be stored anywhere dry and cool.

Can you expound on that a bit? It seems like if you have either a lot of investor money, money from other business units, or money/offsets from the vendor you could keep the channel stuffing operation alive on that?

No because the cash flows reconcile with gaap accounting. You would see a cash falloff if it's all circular bc they have such massive margins

Ah, I see - so each time around the circle the margin gets sucked off the top, and thus the cash exponentially dwindles? So you need to have noncircular external funds (be it from investments, customers, or [other]) coming in to keep it running?

I think it’s probably not happening at scale, but I don’t really see why it couldn’t tbh. GAAP revenue recognition rules are reasonably clear, but I’d challenge anyone to explain exactly when Tesla does and does not recognize revenue, and how they do lease accounting.