At 4 p.m. EST yesterday, an unusual market event sparked fresh debate about the stability of the AI rally. Nvidia shares initially jumped 5% following its earnings release — only to reverse sharply and trade in the red within 18 hours. While most investors were still processing the results, trading algorithms flagged something troubling: the financials don’t seem to line up.
The First Red Flag: Unpaid Customer Bills
Nvidia disclosed $33.4 billion in outstanding receivables, an 89% surge over the past year. A growing number of buyers have received their chips but have yet to pay for them. The average payment cycle extended from 46 days to 53 days — an extra week representing $10.4 billion in delayed cash that may remain unpaid.
A Contradiction in the Inventory Numbers
The chipmaker also reported $19.8 billion worth of unsold inventory, rising 32% in just one quarter. Yet management continues to insist that demand is overwhelming and supply remains tight. Both claims cannot hold true simultaneously — either buyers are not absorbing shipments, or they are acquiring them without the liquidity to settle invoices.
Cash Flow vs. Profit: Another Gap
While Nvidia reported $19.3 billion in quarterly profit, its actual cash generation came in at $14.5 billion — a shortfall of $4.8 billion.
By comparison:
- TSMC and AMD typically convert over 95% of profits into cash.
- Nvidia’s conversion has slipped to around 75%, a level more associated with financial stress than hyper-growth.
Where Things Get Murky
A chain of interlinked deals between major AI players has raised concerns among analysts watching liquidity flows:
- Nvidia provided $2 billion in funding to xAI.
- xAI then borrowed $12.5 billion to purchase Nvidia hardware.
- Microsoft invested $13 billion in OpenAI.
- OpenAI committed $50 billion toward Microsoft’s cloud services.
- Microsoft ordered $100 billion in Nvidia chips for those cloud expansions.
- Oracle extended $300 billion in cloud credits to OpenAI, which in turn placed Nvidia chip orders for Oracle data centers.
This cycle allows the same money to move through multiple companies while each firm books revenue — even if little real cash changes hands. As receivables rise and chip inventories swell, questions emerge about how much of this demand is organic and how much is driven by circular spending across AI ecosystems.
Executives Are Also Signaling Caution
Tech leaders themselves have hinted at concerns:
- Airbnb’s CEO recently described parts of AI revenue as “vibe-driven.”
- OpenAI loses $5.6 billion annually, earning $3.7 billion while spending $9.3 billion. Its $157 billion valuation implies trillions in future profits — projections that academic studies suggest are unlikely for most AI projects.
What Major Investors Are Doing
Some high-profile investors have already repositioned:
- Peter Thiel sold $100 million worth of Nvidia shares on November 9.
- SoftBank exited $5.8 billion on November 11.
- Michael Burry initiated large put positions forecasting Nvidia could drop to $140 by March 2026.
Impact on Crypto Markets
Bitcoin, which has been tightly correlated with AI-driven speculation, has fallen from $126,000 in October to $89,567, a 29% decline.
AI startups collectively hold $26.8 billion in Bitcoin as collateral for loans. A further 40% fall in Nvidia could force lenders to liquidate up to $23 billion in Bitcoin, potentially pushing prices toward $52,000.
What the Timeline Could Look Like
Analysts tracking the financial data models have mapped a potential sequence:
- February 2026 — Nvidia reports Q4 and discloses how many receivables have crossed the 60-day threshold.
- March 2026 — Credit agencies issue downgrades.
- April 2026 — Possible financial restatements begin, triggering rapid unwinding.
Where Fair Value Could Land
Based on cash-flow models, some quantitative funds estimate Nvidia’s intrinsic value near $71 per share, compared to the current $186.
Automated trading systems have already begun adjusting positions. Human investors may still be catching up.
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