Post #4322937

@Enalys@mastodon.zergy.net To put the loan in perspective, it’s a bit less than the total value of Intel. Intel’s value is based on being the largest supplier of CPU chips for laptops and servers (especially cloud servers) in the world, along with a load of successful secondary businesses. Most of the markets Intel is in are saturated and, as the dominant player, there isn’t much potential for them to grow. NVIDIA’s market capitalisation is over ten times the loan amount, but is based on a combination of sales that are mostly to companies that NVIDIA has invested in, the expectation that the companies NVIDIA has invested in will grow, and that NVIDIA’s sales will keep growing. A loan for less than 10% of the company’s value is easy to service. Except that valuation is complete nonsense. I bought NVIDIA when it was (adjusted for splits) $8.6. I looked at their Arm cores, GPUs, and SmartNIC business and thought that they were well-placed to deliver cloud SoCs that could take a good 50% of that market, in addition to remaining the dominant player for GPUs (though with increased competition from the low end: games designed for decade-old GPUs still look good today and, while the newer ones look better, you rapidly stop noticing). I thought $30 was quite reasonable within a few years. Then the bubble started seriously inflating. Morningstar gives them a ‘fair market value’ of $280, which shows how little they actually do in their analyses. So it’s quite feasible that the bubble bursting could wipe out 90% of NVIDIA’s market cap. That would leave them with a loan of a similar value to the company. That’s a very uncomfortable position.