We just got Scammed | Stocks CRASH

Well, Nvidia has released their 10Q,

which contains financial disclosures

that we weren't told about when Nvidia

first reported earnings, and it's

leading to some skittishness in markets.

This morning, the NASDAQ was up 2%.

We were trending towards 617

and plunged. We are now, as I'm

recording this, down a full two

percentage points and we're about to

turn negative on the day. On top of

that, Nvidia that was knocking on the

door of 200 is now also rotating down.

And AMD even lost 232. So, what's going

on? What was in these disclosures that

got everybody a little nervous? Well,

we're going to break down exactly what

we saw. And I have to say some of it was

shocking. Now I want to be crystal clear

about this. The way these companies do

earnings is they release a press

statement and CFO commentary and their

overall earnings numbers. You don't get

any details really. You get some

details, but you get like a little

two-pager, right? Then they do their

earnings call and then they release

their press statement which includes a

little bit more detail. And then a few

hours later when everybody's going

cheersing and drinking beer to the beat,

then they drop the SEC filing called the

10 Q. Now the SEC filing contains some

of the juice and it's interesting juice.

So, first one of the complaints that

I've regularly seen about Nvidia since

earning yesterday, earnings yesterday

was that but Kevin inventory is up 90%

on Nvidia uh from from their comparison

quarter in January. So, comparing back 9

months ago, inventory is up 90%. And I'm

like, well, Jensen did address that. So,

my first rebutt to that is Jensen

addressed that. He said that they don't

want to be supply constrained like they

were with the original Blackwell launch

where they had so much demand and they

couldn't actually get the short-term

products that they needed, the

components, the raw materials and the

materials that go into the supply chain

to actually give them the chips they

needed. So Jensen argued, hey, we're

just we're just building up the

components we need for the chips, you

know, that's all. And I'm like, all

right, all right. I mean, like, I I'm

not going to call Jensen a liar, you

know? I'm like, "All right." So, then

today, I'm like, "Hey, boys and girls,

the 10 Q is out." And the cool thing

about the 10 Q is it actually tells you

the breakdown. So, we did this live.

We're like, "Hey, maybe we could find

the breakdown inside the 10 Q." And boy

oh boy, did we find it? And boy oh boy,

is it not exactly what we expected. Look

at this. certain balance sheet

components as followed. Raw materials

work in progress and finished goods.

Folks, raw materials

from January rose 23%. So they have 23%

more raw materials in October than they

did in January. But finished goods,

which basically means ready to sell

assets, doubled from 3.2 billion to 6.8.

Now, maybe that's okay. Maybe that's

just because they're selling more. But

if they're quote unquote sold out, why

are finished good inventories rising?

And why didn't you explain that? You

only told us that, oh well, we just want

more inventory because, you know, we

need the components, but your raw

material stuff only went up 23%.

And this is a little sus. Your prepaid

supply and capacity arrangements

right here declined. Look at that. So

the prepaid supply that you're hiring,

you know, TSM and these other companies

for declined from 1.7 billion to 1.5

billion. That's a 12% decline. Now maybe

there's an explanation for this, but

it's odd. Work in progress did go up by

156%. That's fair. You know, maybe we

could argue that's the issue. But raw

materials are only up 23%. And finished

goods doubling, you kind of left that

part out, Mr. Jensen. We didn't really

like that. That was a little

>> hoopy dupy.

>> You know, you kind of you kind of came

to us and said, "Guys, guess what? We're

[music] doing so well. We're just

building up our inventory so we have

more stuff so we can print more because,

you know, [music] we're sold out.

It's great.

Yay. That's what we were told. But the

reality is that was a halftruth, buddy.

That was a halftruth.

Okay. All right. So, it's not a complete

lie. It's a half lie. Then we look at,

okay, well, what are they up to with

their investments? Because we know that

they just partnered with Microsoft on a

$15 billion deal. So, they partner with

Microsoft on a $15 billion deal. And the

way this is going to work is Microsoft

and Nvidia are going to together invest

in Anthropic. And then Anthropic is

going to turn around and spend $30

billion on Microsoft Azure contracts

that are going to be based on Nvidia

chips. You see what I'm doing with my

hand here? The giant circle. We're going

to give you money so you can pay us. Got

it? Okay. Now, who's paying more of

that? Microsoft or Nvidia? Well, it

turns out they disclosed it. Microsoft

didn't. They actually disclo disclosed

it. Take a look at this. Commitments and

contingencies. In November, we entered

in an agreement to invest up to 10

billion into Anthropic. So, in my

opinion, that means that Microsoft is

doing five and Anthropic is doing $15

billion.

Interesting. So, Nvidia is having to do

more of the investing and the heavy

lifting than Microsoft is doing. On top

of that, they guaranteed, we believe

this is Coreweave, they guaranteed one

of their partners. I'll just read this

to you. In the third quarter, we entered

an agreement to guarantee a partner's

facility lease obligations in the event

of their default. That agreement allowed

them to secure,

you know, their financing and their data

center or whatever backed by our credit

profile. Now, Cororeweave, we think it's

Corore, put $470 million into an escrow.

So, basically, hey, can I use your

credit score and I'll give you some of

the money in cash, but I really want to

build this data center, but I can't get

the financing unless you help guarantee

me. Okay, weird. Weird, but whatever.

It's happening. On top of that, we have

Nvidia's full set of cloud spending

commitments now, which have doubled

since the last time they disclosed this.

Take a look at this. This is Nvidia's

cloud spending plan. And they do this so

that way these data centers can uh uh,

you know, build out their data centers

and have a guaranteed customer. But look

at this. Nvidia says, "We're going to

spend a billion in 26, 6 billion in 27,

6 billion in 28, 5 billion 29, 4 billion

in 2030, 4 billion 2031." According to

the information, which this is in the 10

Q we just looked at, according to the

information, that would make Nvidia one

of the largest cloud customers.

But wait a minute, if there's so much

demand for the cloud, why is the very

company that's building the chips to

support the cloud becoming the largest

customer for the chips?

And so this is where I made the joke.

You'd see it here. That would make

Nvidia one of the world's largest cloud

spenders and users of GPUs.

That made me sort of think like, man,

you know, maybe Tesla should do this too

because obviously you could pump your

stock by doing this. So maybe Tesla

should make cyber cabs and then sell

them to someone else so they could say

they've delivered another car and they

could recognize the revenue growth and

then they could rent back their own

cyber cab, you know, over the next 6

years in their robo taxi network. Now

they get the best of both. They pump

their sales today because somebody else

bought it and they pump their robo taxi

revenue.

Now, normally what a company does is you

make a chip that you might need and you

just

use it. Like you don't sell it and then

borrow it back because that's the

accounting magic that's making people

nervous. Now, don't get me wrong, not

all of the bears, I think, are, you

know, fully genuy

like reasonable. Like, for example,

there's this guy, I guess, the Coastal

Journal, and he's got this giant

Substack dumping on Nvidia, and I'm

like, "Oh, this guy must be short." But

the irony of it is I went to his

Substack, and I did a command F for the

Mdash. The guy literally had 29

m dashes in one article, which is a

telltale sign that he's using chat GPT

to write the whole damn article bagging

on AI.

So, I don't think all of the bears are

genuine here. [laughter]

Maybe remove all 29 of the M dashes. But

anyway, another thing that I thought was

sus. So, I looked at their accounts

receivable breakdown,

and you could actually see this under

the notes. It's called it's called the

uh uh under the balance sheet component

section. And I wrote this down so you

could see it a little bit more visually

because the way they put it in the 10Q

isn't really obvious. But this was also

concerning about Nvidia. Watch this. So

on uh accounts receivable on January

26th, customer number one accounted for

17% of accounts receivables and customer

number two accounted for 16% of accounts

receivables. Okay. Well, we know

accounts receivables are up like $10

billion from January. But then I look at

this.

The big customers, customer number 1, 2,

three, and four, all of them are now

accounting for big portions of the

receivables. So, the biggest customers

are now not paying.

That's odd. Now, yesterday, in fairness,

when I only saw the press statement, I'm

like, well, I mean, their revenues are

like up a double year-over-year. Like,

of course, accounts receivables are

going to go up. But it's odd to me that

it's not everyone who is seeing their

accounts receivable going up. It's

actually some of the largest customers,

which these are probably Coreweave,

Microsoft,

uh uh you know, I don't I don't know,

whatever. Uh the other Oracle, that's

the one I was looking for. Oracle,

right? So, the biggest customers are

slowing down their payments.

Interesting.

Somebody says Jensen only said he was

sold out of cloud chips, not Blackwell.

Interesting way to put it. Interesting.

Uh, okay. So, uh, now what we have is,

let's see here.

All of this comes at the same time as

you're getting people getting really

sused out about OpenAI because OpenAI is

seen as this company that is basically

making all of these commitments to spend

money like right here since it launched.

OpenAI has been the one the one to beat.

Uh Nvidia and Microsoft investing are

investing 15 billion into Anthropic

which in turn will spend 30 billion on

Azure and Nvidia chips. Open AAI is

doing the same thing which led the stock

market to fall or at least Microsoft

fell after the announcement. They say

here that you know OpenAI is going to

spend $300 billion over the next 5 years

in compute power from Oracle but Nvidia

is going to invest $und00 billion into

OpenAI and uh you know Oracle is buying

Nvidia chips. So it's all a giant

circle, right? But I thought this was an

interesting statement over here uh in

the Economist article. actually can't

see exactly where the statement was, but

where where was the statement about them

being credit? Ah, there there there.

That marked the start of 1.4 trillion of

spending commitments by OpenAI, which

raised fears in financial markets of a

binge by uncreditworthy

borrowers to finance new AI data

centers. Yeah, that is what you're

seeing. So, it's not just the Economists

now talking about cracks appearing in

OpenAI, but you literally have the

Financial Times questioning who is the

auditor for OpenAI. And all they could

find was this financial filing right

here from 2023. And this financial

filing was put together by an accounting

firm right here in San Francisco called

Fontello, Dunfield, and Otake Limited

Partners. And if you go to their

website, here it is.

Hold on, let me get myself out of the

way so you could see the full website.

Here it is. Here, let me go to full

screen so you could really take it all

in.

There it is.

Yeah. So, that now has people going,

"Who the hell audits Open AAI?" Now,

OpenAI in fairness is a private company

and they don't have to disclose their

auditor in the United Kingdom. They're

supposedly audited by Deote.

But here's the problem regarding the big

auditors. You ready for this? This is

crazy as well. Ernston Young, one of the

big four, and KPMG, the other big four,

sell products that use Microsoft Azure

OpenAI tools.

Deote definitely uses OpenAI internally

and PWC sells OpenAI products.

So in other words, Deote is using OpenAI

products

and they might be the auditor for OpenAI

or these people are doing you know

accounting audits for them. We don't

know. It's a private company so we don't

know.

So the Financial Times is like, hey, you

know, if it's a big four, they might be

a little conflicted because they

literally either sell or use OpenAI. And

if it's not a big four and it's this

guy, well then that might be another

problem, too.

# just saying. So it's weird.

And all of this comes out in the 10 Q

after all of the fanfare,

which is also annoying. Okay, now what

else? Well, basically,

when we put this together, you know,

Jensen tells us, "Oh, don't worry.

Inventory is going up because, you know,

we're sold out and uh and we're just

trying to make sure we have enough in

the pipeline." really because your

finished product inventory doubled.

That's sus. Okay, that's weird. You told

us a halftruth.

You're having to guarantee corewave so

they don't go bankrupt so they could

keep the debt cycle going. Private

credit markets are funky. And at the

same time, your prepaid supply and

capacity agreements are declining by

12%. It's just odd. It's odd. And if we

go back to the days of history, if we go

back to Cisco, Cisco actually beat

earnings over and over and over again

going into the dotcom bubble. And guess

what?

The.com bubble didn't burst because

Cisco missed earnings. They actually

were beating earnings. The dotcom bubble

burst in spite of Cisco beating

earnings. People just got sick and tired

of what was going on and the valuations

and what people were paying. And look at

this. as I get to the end of this

segment. AMD now down 420. The Q's

literally at 595. Holy smokes. In my

alpha report this morning, I'll pull up

the PDF version because I don't think

people will believe it. Uh but uh in my

alpha, I'll give you I'll give you the

preview that I gave. Oh, well, this will

work. Uh this was my this was a segment

of our alpha report today. I said uh

that best case today is we slowly get to

617. That would be bullish through

December 8th. However, I said the Q's

need to hold 107 and we must must must

we need I literally incap it. We need to

hold 232 on AMD and we need to break 200

in Nvidia. Otherwise, if we lose those

two, if we lose 232 on AMD and we lose

200 on Nvidia, we could risk losing 607.

If we lose 607, we trend back to 595. I

kid you not, that is my alpha report

this morning. And look at the damn cues.

Trying to get to 617, but what happens?

We can't hold 232 on AMD. We can't hold

even close to 200 or 198 here on Nvidia.

And so what happens? We plummet. And as

soon as we lose 607, straight back down

to 595 in the alpha report signed,

sealed, and delivered to you before the

market opened.

Crazy.

Anyway, um

this is wild and uh I I don't know what

to say, but it is wild. And I appreciate

all of you who joined uh in the alpha

report before that uh that coupon

[music] code expired. Um and um yeah,

there you have it.

>> Why not [music] advertise these things

that you told us here? I feel like

nobody else knows about this.

>> We'll we'll try a little advertising and

see how it goes.

>> Congratulations, man. You have done so

much. People love you. People look up to

you. Kevin Praath there, financial

analyst and YouTuber, Meet Kevin. Always

great to get your take.