On August 27, Nvidia (NASDAQ:NVDA) confirmed it had paused parts of a financing program built to help AI cloud companies afford its chips, according to a Wall Street Journal report cited by Reuters. The timing stands out. Days earlier, Nvidia posted one of the biggest quarters in corporate history, with revenue jumping 106% and profit surging 126%. Investors now have to weigh a company still growing at a pace few businesses ever reach against fresh questions about how it finances the customers buying its chips.
Records That Keep Piling Up
The scale is the headline. Revenue for Nvidia’s fiscal second quarter, which ended July 26, came in at $96.2 billion, up 106% from a year earlier and ahead of both Nvidia’s own targets and Wall Street’s estimates. Gross margin expanded to 75% from 72.4% a year ago, operating income climbed 124% to $63.7 billion, and adjusted earnings per share rose 120% to $2.22. Guidance for the current quarter points to $108 billion in revenue, an 89.5% year-over-year increase.
The bigger reassurance for shareholders is that the hyperscalers building their own AI chips are not walking away. Hyperscale revenue hit $48.7 billion in the quarter, up 102% from a year ago, even as Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOGL) executives said they will keep buying Nvidia hardware alongside their custom silicon. Amazon Web Services agreed to deploy an additional 2 million Nvidia GPUs over the next two years, a deal CEO Jensen Huang said could also include millions of CPUs. Nvidia is leaning into that opening, projecting $20 billion in stand-alone CPU revenue this year and more than double that next year, while also committing to return at least half its free cash flow to shareholders.
The Deal Nvidia Just Shelved
The paused financing initiative is where the bear case sharpens. Announced less than two months ago, the program offered credit support to small AI cloud firms in exchange for a cut of their revenue, with Nvidia agreeing to rent back compute capacity those firms couldn’t sell and collecting 50% of revenue above a certain threshold. Nvidia stepped back from some of those deals last week, though a spokesperson said the broader model “is still in place and continues to evolve due to high demand.” The report noted some Nvidia employees had privately worried the arrangement could draw antitrust scrutiny, and that the company had told cloud providers they could only rent chips to approved customers, a level of control that reportedly irritated potential partners early on.
That pullback lands as scrutiny over Nvidia’s role in so-called circular deals keeps building. This month alone, Nvidia helped arrange $500 billion in financing from major US financial institutions for its customers and agreed to guarantee up to $105 billion to help OpenAI lease data center capacity. Critics worry that money flowing from Nvidia back into the same ecosystem buying its chips could make demand look stronger than it organically is, a concern the paused program does little to settle even as Nvidia insists the underlying business remains healthy.
Money Still Betting On Nvidia
Hedge fund ownership climbed from 275 funds to 285 in the most recent quarter, a sign institutional buyers kept adding even as the financing story broke. Short interest sits at just 1.23% of the float, which points to little organized skepticism toward the stock. Nvidia trades at 23.92 times forward earnings, as of August 28, a multiple that assumes the growth from this quarter’s report keeps showing up.
Where The Story Goes Next
Nvidia’s quarter left little room to argue the growth story is slowing, and hyperscalers keep signing up for more capacity even as they build their own chips. But the paused financing program is a reminder that the mechanics behind that growth are getting more complicated, not less, and regulators tend to notice complexity. The bull case leans on hyperscale demand and the CPU ramp outrunning any single financing hiccup, while the bear case hinges on whether Nvidia can keep expanding these arrangements without inviting the antitrust scrutiny its own employees have already flagged.
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