Nvidia's Circular Money Question: Can the AI Chip King Finance Its Own Demand Without Breaking Trust?
Published on 07/31/2026 at 16:02 | Redaktion boerse-global.de
The most valuable company in the world is caught in a paradox of its own making. Nvidia's chips power the artificial intelligence revolution, yet the very structure of how that revolution is being funded has investors questioning whether the boom is built on genuine demand or a financial hall of mirrors.
The stock closed Thursday at €169.30, up 1.93 percent on the day, but the weekly picture tells a more sobering story: a 6.99 percent decline that has left the shares trading 15.2 percent below their May record of €202.50. That gap from the peak is uncomfortable for a stock that spent years moving in only one direction, though it hardly constitutes a collapse.
The $250 Billion Question
The source of investor anxiety isn't China, nor is it competition from Google's TPU chips. It's the growing scrutiny of so-called circular financing arrangements — structures in which Nvidia appears to be underwriting its own customer base.
Reports indicate Nvidia is negotiating a guarantee for $250 billion that would allow OpenAI to lease computing capacity for a US data center project. The pattern is delicate: a supplier effectively financing its own demand. When word of this emerged, the stock dropped nearly 5 percent in a single session, dragging the entire chip sector down with it and allowing Apple to reclaim the title of the world's most valuable listed company.
Should investors sell immediately? Or is it worth buying Nvidia?
This isn't the first time the circularity concern has surfaced. Michael Burry, the investor who famously bet against the US housing market in 2008, has warned of "circular spending of biblical proportions." Billionaire Mark Cuban echoes the worry, cautioning about a "frightening problem" if AI breakthroughs don't translate into real corporate profits quickly enough. The uncomfortable parallel both draw is the dot-com bubble, where growth was often more promise than substance.
The mechanics are straightforward. Microsoft, Alphabet, Amazon and Meta — the hyperscalers — plan to invest roughly $732.5 billion in AI infrastructure in 2026. A significant portion flows to Nvidia. But Nvidia, in turn, invests back into these same customers and their ecosystems. The question hanging over the market: does this reciprocal financing represent genuine growth or a self-sustaining illusion that works only as long as everyone keeps playing along?
Nvidia's public posture remains defiantly expansionist. In late July, the company announced a partnership with South Korea's SK Group encompassing business volume of over $500 billion. CEO Jensen Huang described it as "the largest infrastructure expansion in the history of mankind." Bold words — but they underscore a strategy built on momentum rather than caution.
A Critical Date Approaches
August 26, 2026, is when the market gets its next concrete read on whether the numbers justify the narrative. Nvidia will report second-quarter results for fiscal 2027, having guided to revenue of approximately $91 billion — a notable jump from the $81.6 billion posted in the prior quarter.
Institutional investors are split on the feasibility of that target. True North Advisors and SEB Asset Management expanded their positions earlier this year, while Trivest Advisors cut its stake by more than 70 percent. That divergence among professionals suggests genuine uncertainty rather than consensus conviction.
The cloud giants' upcoming earnings reports will be just as important. How convincingly Microsoft, Meta, Amazon and others signal continued AI infrastructure spending will likely determine near-term sentiment. Alphabet shares already stumbled after the company raised its investment forecast — a preview of how jittery the market has become about rising capital expenditure plans. If any of the major hyperscalers delivers weak guidance, skepticism about circular financing will almost certainly intensify.
China: Symbolism Over Substance
On the export front, the news oscillates between hope and disappointment. Trade official Jeffrey Kessler told Congress that H200 chip shipments remain negligible despite approved licenses totaling $10 billion. Chinese tech companies have ordered more than two million H200 chips for 2026, yet Nvidia's entire inventory sits at roughly 700,000 units. The gap illustrates a stark reality: enormous paper demand exists, but Washington won't let it through.
Meanwhile, the competitive clock ticks in Beijing. Huawei's Ascend 950PR, China's most advanced AI chip, has been in mass production for nearly four months, with commercial shipments beginning in March. For investors, China should be treated as a call option rather than a pillar of the investment thesis — any additional volume is a bonus, but nobody should count on a swift return to the roughly 13 percent revenue share the region once contributed.
Technicals: Bruised but Not Broken
The chart presents a mixed picture. The 14-day RSI sits at 41.6, drifting toward oversold territory without reaching extremes. Annualized volatility of nearly 37 percent reflects how frayed trading has become. Yet Nvidia remains 1.79 percent above its 200-day moving average of €166.33 — a level that has repeatedly held as support this year. The stock also trades 21.12 percent above its 52-week low of €139.78, which argues against the market pricing in a collapse of the AI investment cycle. This looks more like a repricing of near-term risks than the beginning of a structural decline.
That said, the technical signals aren't uniformly reassuring. The stock sits 3.23 percent above its 200-day average, and the RSI of 44.4 from the other reading suggests a stock without clear directional momentum. The 200-day line remains the key battleground: hold it, and the long-term uptrend stays intact; lose it, and the correction could deepen.
Nvidia at a turning point? This analysis reveals what investors need to know now.
The Bull Case Still Has Its Champions
Despite the recent turbulence, Wall Street remains largely constructive. The consensus price target stands at €262.76 — implying roughly 53 to 55 percent upside from current levels. Morningstar assigns Nvidia a "Wide Moat" rating, acknowledging a broad competitive advantage, while warning of "very high uncertainty" and pegging fair value at approximately $280.
Nvidia is also deploying financial firepower to bolster confidence: an $80 billion share buyback program and a quarterly dividend of €0.25. These are signals of financial strength, though they only convince if the underlying cash flows remain sustainable.
Competition is emerging on another front as well. Google is advancing its TPU chip line, with version 9 aiming to challenge Nvidia's delivery volumes by 2028. Nvidia's moat — built on both hardware and software — could face erosion from multiple directions.
The Burden of Proof
The central question remains unresolved: does organic growth suffice to justify the reciprocal multibillion-dollar commitments among tech giants, or does the system only hold together as long as all participants keep playing? The next two weeks, with cloud providers reporting earnings, will offer early answers.
Nvidia's short-term trajectory depends less on its own fundamentals — which remain robust by most measures — and more on how convincingly the hyperscalers signal continued AI investment. The burden of proof for transparent, non-circular demand now rests squarely with Nvidia itself. The August 26 report will be the first major test of whether the company can meet it.
Ad
Nvidia Stock: New Analysis - 31 July
Fresh Nvidia information released. What's the impact for investors? Our latest independent report examines recent figures and market trends.
Disclaimer regarding our articles: No investment advice, no buy or sell recommendation. Information on prices, companies, and markets is provided without guarantee; changes are possible at any time. Stock market transactions can lead to substantial losses. Our articles are created and reviewed in whole or in part automatically with the support of AI.
