Nvidia (NVDA), Cash Flow $240 Billion...Reversal of Circular Financing Controversy

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A massive cash amount that could reverse the circular financing controversy surrounding Nvidia (NVDA) has been revealed.

According to U.S. economic media outlet Barron's on July 29 (local time), Nvidia generated $191 billion in cash flow over the past two years. LSEG estimated an additional $49 billion would be added this quarter alone.

Concerns have continued on Wall Street that Nvidia is creating a circular financing structure by investing funds across the entire AI ecosystem, thereby boosting demand for its own products again. The view is that Nvidia's investments and its customers' purchases of AI chips intertwine, making it difficult to judge actual demand.

Barron's diagnosed that Wall Street is misinterpreting Nvidia's investment structure. The reason Nvidia is investing funds across the AI industry is not due to difficulty in external fundraising. Instead, it's because the company has accumulated an excessive amount of cash through its business.

Adding this quarter's estimate to the cash flow generated over the past two years, the total amounts to $240 billion. For Nvidia, with its massive cash reserves, investing in the AI ecosystem is less a choice to fill funding gaps and more a means of capital allocation.

Barron's evaluated that Nvidia should be viewed less as a company exposed to circular financing risk and more like a bank supplying funds to the AI industry. The conclusion is that Nvidia's AI investments are not a structure to hide a lack of funds, but a strategy to utilize the large amount of cash generated from its business.

[Article Key Summary]

-Nvidia generated $191 billion in cash flow over the past two years.

-LSEG estimated that Nvidia would generate an additional $49 billion in cash flow this quarter alone.

-Barron's assessed Nvidia's AI investments as a capital allocation strategy utilizing massive cash, rather than circular financing.

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