"Just a friendly reminder that most of Mag 7 darling $NVDA's OCF is actually capex from other Mag 7 darlings,"
Jim Chanos said in a
X post on Thursday, referring to operating cash flow and capital expenditure.
The spending bonanza represents "immediate revenue/profit for $NVDA, but capitalized costs for their Big Tech customers," Chanos continued. "Who just extended the depreciable lives of their data center equipment (like $NVDA chips)."
The famed short-seller — who helped to take down Enron, Tyco, and WorldCom — was underscoring that Nvidia is raking in cash that it can use to run and expand its business, make acquisitions, or fund returns to shareholders. Meanwhile, its Big Tech customers are spending a fortune on chips that will steadily lose value over time.
'Cannibalism'
Larry McDonald, a former trader and the founder of "The Bear Traps Report," echoed Chanos' point in his own
X post.
"Mag 7 Cannibalism, rolls on … until the music stops, tick toc," he said.
Of course, Nvidia's customers are scrambling to buy its chips because they need them to power products and services that they expect to generate huge profits in time.
But it's possible the likes of Microsoft and Meta won't want as many chips in the future, or will decide they're spending too much and cut back. They could also build their own chips, or buy cheaper ones from another supplier, stalling Nvidia's gravy train.
