Marina Lyubimova
● Lawrence McDonald, who founded The Bear Traps Report and previously traded at Lehman Brothers, just threw cold water on Nvidia's rumored OpenAI financing plans. According to a Wall Street Journal report, the chip giant might guarantee loans for the AI company—and McDonald isn't mincing words about it.
● "This will be a car crash," McDonald tweeted, referencing the WSJ piece. "Per WSJ, Nvidia is discussing loan guarantees for OpenAI. Let's use Jensen's stock margin account, $NVDA equity at $4.7T, to support Sam's reckless spending spree." His critique zeroes in on what he sees as dangerous overconfidence from Nvidia CEO Jensen Huang, whose aggressive AI partnerships are tying the company's financial fate more tightly to unproven software ventures.
● Here's the concern: if Nvidia backs OpenAI's loans, it's essentially putting its own balance sheet on the line for another company's spending habits. That's risky business, especially when OpenAI burns through cash building infrastructure and developing models faster than it books revenue. McDonald's worry? This kind of over-leveraging mirrors the mistakes that tanked entire financial sectors before—think 2008-style domino effects.
● The numbers matter here. With Nvidia's market cap sitting at $4.7 trillion, using company stock or assets as collateral for OpenAI could mess with equity valuations and trigger serious volatility. Some analysts suggest OpenAI should just raise money the old-fashioned way—direct investment from its existing backers or sovereign wealth funds—rather than cooking up credit arrangements that bleed into Nvidia's shareholder risk.
● This whole situation shines a spotlight on how shaky AI financing has become. Building cutting-edge AI isn't cheap, and as competition heats up, companies are leaning on increasingly complex financial engineering to keep the lights on. Critics argue these moves could backfire, hurting profit margins and destabilizing the entire AI investment landscape.
Marina Lyubimova
