(2025-11-24) Zitron The Haters Guide To Nvidia

Ed Zitron: The Hater's Guide To NVIDIA. I'm going to try and explain both what this company is, how we got here, and ask questions that I, from the perspective of a dumbass, have about the company, and at least try and answer them.

NVIDIA sells "GPUs" — graphics processing units — that power the large language model services that are behind the whole AI boom, either through "inference" (the process of creating an output from an AI model) or "training" (feeding data into the model to make its outputs better). NVIDIA also sells other things, which I’ll get to later, but it doesn’t really matter to the bigger picture.

90% of NVIDIA's revenue now comes from selling either GPUs for LLMs, or the associated software and hardware to make all of that stuff run.

Back in 2006, NVIDIA launched CUDA, a software layer that lets you run (some) software on (specifically) NVIDIA graphics cards, and over time this has grown into a massive advantage for the company.

GPUs are great for parallel processing

CUDA is proprietary to NVIDIA, and while there are alternatives (both closed- and open-source), none of them have the same maturity and breadth

There really isn’t anyone who can do the same thing as NVIDIA, both in terms of software and hardware, and certainly not at the scale necessary to feed the hungry tech firms that demand these GPUs.

Anyway, back in 2019 NVIDIA acquired a company called Mellanox for $6.9 billion

Mellanox was a manufacturer of high-performance networking gear, and this acquisition would give NVIDIA a stronger value proposition for data center customers. It wanted to sell GPUs — lots of them — to data center customers, and now it could also sell the high-speed networking technology required to make them work in tandem.

Though it took until November 2022 for ChatGPT to really start the fires, in March 2020, NVIDIA began the AI bubble with the launch of its "Ampere" architecture

The most important part, however, was the launch of NVIDIA's "Superpod"

The "Superpod" concept — groups of GPU servers networked together to work on specific operations — is the "thing" that is driving NVIDIA's sales

Because nobody else has really caught up with CUDA, NVIDIA has a functional monopoly

Every year, NVIDIA comes up with a new GPU, and that GPU is much, much more expensive, and NVIDIA makes so much more money, because everybody has to build out AI infrastructure full of whatever the latest NVIDIA GPUs are

With Blackwell — the third generation of AI-specialized GPUs — came a problem, in that these things were so much more power-hungry, and required entirely new ways of building data centers, along with different cooling and servers to put them in, much of which was sold by NVIDIA.

Blackwell was...less cooperative, and ran much hotter.

it requires entirely different ways to cool it, meaning your current data center needs to be ripped apart to fit them.

NVIDIA has been printing money, quarter after quarter, going from a meager $7.192 billion in total revenue in the third (calendar year) quarter of 2023 to an astonishing $50 billion in just data center revenue (that's where the GPUs are) in its most recent quarter, for a total of $57 billion in revenue

NVIDIA makes so much money, and it makes it from a much smaller customer base than most companies, because there are only so many entities that can buy thousands of chips that cost $50,000 or more each.

So, let me give you a theoretical example. You, a genius, have decided you are about to join the vaunted ranks of "AI data center ownership." You decide to build a "small" AI data center — 25MW

hardware costs $720 million

Anyway, sadly data centers require something called a "building... like $300 million. We're now up to $1.02 billion, and we haven't even got the power yet.

Private credit — money loaned by non-banking entities — has been feeding more than $50 billion dollars a quarter into the hungry mouths of anybody who desires to build a data center. (corporate debt)

Don't worry about those pesky high interest rates — you're about to be printing big money, AI style!

after two years and over a billion dollars, you too can own a data center with NVIDIA GPUs that turn on, and at that point, you will offer a service that is functionally identical to everybody else buying GPUs from NVIDIA.
Your competitors are Amazon, Google and Microsoft, followed by neoclouds — AI chip companies selling the same thing as you, except they're directly backed by NVIDIA, and frequently, the big hyperscaler companies with brands that most people have heard of, like AWS and Azure.

this stuff costs an indeterminately-large amount of money to run. You may wonder why I can't tell you how much, and that's because nobody wants to actually discuss the cost of running GPUs, the thing that underpins our entire stock market.

these GPUs run hot, all the time, and that causes some amount of them to die.

Deep-pocketed hyperscalers like Microsoft, Google, Meta and Amazon representing 41.32% of NVIDIA's revenue in the middle of 2025

Amazon ($15 billion), Google ($25 billion), Meta ($30 billion) and Oracle ($18 billion) have all had to raise massive amounts of corporate debt to continue to fund AI-focused capital expenditures, with more than half of that (per Rubenstein) spent on GPUs.

NVIDIA, at this point, is around 8% of the value of the S&P 500

It is not enough for NVIDIA to simply be a profitable company. It must continue beating the last quarter's revenue, again and again and again and again, forever

NVIDIA's continued success — and its ability to continue delivering outsized beats of Wall Street's revenue estimates — depends on:
The willingness of a few very large, cash-rich companies (Microsoft, Meta, Amazon and Google) to continue buying successive generations of NVIDIA GPUs forever.

after all of this, large language models, the only way to make any real money on any of these GPUs, must prove they can actually produce a profit.

Based on my calculations, there's likely little more than $61 billion of actual AI revenue in 2025 across every single AI company and hyperscaler.
Note that I said "revenue." Absolutely nobody is making a profit.

Nvidia stock price:

Shorter-term candlestick chart:

Revenue by product line: