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Conspiracy theories surrounding Nvidia have made the rounds on social media, and the Wall Street company is having none of it.
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Bernstein dismissed the baseless theory that CoreWeave is a shell company driving much of Nvidia’s recent growth.
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“We can’t believe we felt the need to write this memo today. And yet, here we are.”
“Please don’t get your investor research from Twitter randos.”
That’s the main message behind Wednesday’s memo, which Bernstein analyst Stacey Rasgon was forced to debunk about the conspiracy theory. Nivea It’s been making the rounds on social media this week, prompting clients to question whether it’s worth it and whether it could hurt Nvidia stock.
“We can’t believe we need to write this note today. And yet, here we are,” he wrote.
The buzz on social media goes something like this: Much of Nvidia’s growth this year was fueled by GPU sales to a shell company called CoreWeave, a startup founded in 2017 by three commodity traders focused on crypto mining.
Conspiracy theories point to Nvidia’s second-quarter results, which saw revenue more than double while cost of goods sold rose just 7%.
Further fueling their suspicions is the web of connections between Nvidia and CoreWeave. For example, Nvidia invested 100 million dollars in CoreWeave earlier this year. CoreWeave last month raised $2.3 billion in debt from Magnetar Capital and Blackstone, and used Nvidia’s chip lineup as collateral. CoreWeave plans to use the debt from Nvidia to buy more chips and hire more talent to help build the cloud platform.
Nvidia and CoreWeave declined to comment.
But Rasgon thoroughly discredited the conspirator in his memo to his clients.
“Aside from somewhat hilariously confusing ‘Blackstone’ with ‘Blackrock’ in the process, this is also nonsense. Nvidia didn’t need help from CoreWeave (or anyone else) to leak the quarter (their products are all classifieds) and [CoreWeave] The debt institution It was announced on August 3 (after the end of the quarter) and the release indicated that the deployment had not yet taken place.
CoreWeave is a real company that has moved away from its crypto origins and is now focused on building a GPU cloud platform using Nvidia’s highly sought-after H100 chips. It is not a shell company. CoreWeave recently announced a new $1.6 billion data center in Texas and plans to have 14 data centers up and running by the end of the year.
And while Nvidia bought a stake in CoreWeave, it has invested in 10 other AI startups so far this year.
“As companies like CoreWeave build businesses based on NVIDIA GPUs, it’s good for NVIDIA to see them succeed as they develop their own in-house AI offerings for large cloud service providers.”
Finally, he said there’s a simple explanation behind Nvidia’s 7 percent COGS increase despite revenue increasing more than 100% last quarter.
“The real explanation is more prosaic, to note, the company took 1.34B (~$1.22B in inventory and $122M in warranty inventory) of cost of goods sold last quarter. Essential documents increased by ~70% YoY in FQ2, excluding COGS charges, and revenue 101 % increase, ~76% increase in gross margin and is completely normal in terms of YOY strength in the data center,” said Rasgon.
He reiterated his “outperform” rating on Nvidia with a price target of $675, representing a 46% upside from current levels.
Read the original article on Business Insider
