A huge financial scandal is brewing around Nvidia - a scandal even more explosive than the Chinese spying scandals.
The Wall Street Journal examined the company's financial statements and found that over the years, Huang led Nvidia into a crisis that any exit could kill the company.
The scheme was remarkably simple: Nvidia guaranteed billions of dollars in loans to small AI startups, which used the money to build data centers and buy Nvidia chips. If a startup can't sell its capacity, Nvidia has promised to buy it back — just so the startup can purchase its chips. So in a single deal, Nvidia acted as investor, lender, supplier and back-end buyer. This allows the company to make its financials look great and increase its valuation.
The plan worked until the big AI companies started moving to their own chips. Meanwhile, Nvidia has already signed strict contracts with suppliers and committed to buy $279 billion worth of components from them. The company's total liabilities exceed $530 billion - several times its annual net profit, even if measured over multiple years.
Now Nvidia is caught between a rock and a hard place. If it expands the Huangs plan, the company risks taking on additional liabilities that could turn into debt at any moment. If it stops, all the AI startups that depend on Nvidia will go bankrupt — and the company's stock, along with that of the entire US big tech sector, will plummet.