Key Takeaways
- NVIDIA is putting $3 billion into Meta Platforms’ $25 billion stock sale, and Scott Galloway compared NVIDIA’s web of investments to FTX’s.
- The Meta stake is about 3% of NVIDIA’s fiscal 2026 free cash flow, so the FTX comparison goes too far, but a big share of NVIDIA’s demand now rests on its own money.
- Management expects AI labs NVIDIA backs with its balance sheet to make up roughly a quarter of next year’s business, and NVIDIA’s investments, commitments and guarantees add up to more than $260 billion.
- NVIDIA trades at about 17x forward earnings, its lowest in five years, and its Nov. 17 report will show whether its customers are paying any faster.
NVIDIA (NVDA) just bought a piece of a company that buys its chips.
Last week, NVIDIA said in a press release that it’s putting $3 billion into Meta Platforms’ (META) stock sale, and that the two are deepening their partnership around Meta’s Muse AI models. Meta, for its part, plans to expand its use of NVIDIA’s Vera Rubin chips.
(Meta upsized the sale to $25 billion, at $625 a share, and NVIDIA, AMD and Broadcom agreed to buy up to $5 billion of it between them.)
NYU Stern professor Scott Galloway put it bluntly on this week’s episode of the Prof G Markets podcast:
“Nvidia is not only selling the picks and the shovels, they’re financing the mine and they own the bank that’s loaning the money to finance the mine to buy those shovels.”
Harsh, but not entirely off base.
He went further. Chart everywhere NVIDIA has invested, he said, and “it feels eerily reminiscent to [FTX] in their heyday and how Sam Bankman-Fried was investing in everything crypto and propping up the entire ecosystem.”
And on Meta: “If Meta needs Nvidia to go out and buy its equity or buy its debt, that tells you something about market sentiment and demand.”
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Equity is only part of it. Former SEC Chair Gary Gensler told Bloomberg Talks last week that the guarantees behind the data centers worry him: “I worry about all these guarantees that Broadcom, NVIDIA, AMD have written back into these data centers and it’s off balance sheet.”
Wall Street is counting on that demand
Analysts expect NVIDIA’s revenue to more than triple, from $215.9 billion in fiscal 2026 (the year ended January 2026) to $692 billion in fiscal 2028:
A good share of that rests on NVIDIA’s own money. On its August earnings call, management said it expects AI labs it backs with its balance sheet to make up roughly a quarter of next year’s business.
NVIDIA has put nearly $50 billion into frontier AI labs, capped its guarantee on OpenAI’s Ohio data center leases at $105 billion, and backstopped $36 billion of deals with AI cloud companies. The Information reported last week that it’s also in talks to guarantee debt for an Nscale data center that Anthropic plans to use.
Its customers are also taking longer to pay. Receivables climbed to $63.1 billion on July 26 from $38.5 billion in January, and days sales outstanding rose to 60 from 45 the quarter before.
$3 billion is pocket change for NVIDIA
Next to NVIDIA’s cash flow, the Meta check is tiny. NVIDIA produced $96.7 billion of free cash flow in fiscal 2026, up from $3.8 billion three years earlier:
The Meta stake is about 3% of a single year’s free cash flow. Judged on that check alone, the FTX comparison doesn’t hold up.
But Meta is the smallest piece. As of July 26, NVIDIA held $99 billion of investments in other companies and had committed $25 billion more. Add the OpenAI guarantee and the AI cloud backstops, and the total tops $260 billion (though the guarantees only pay out if a tenant defaults). That’s well over two years of fiscal 2026’s free cash flow.
And the cash is coming in more slowly. Free cash flow fell to $21.3 billion in the July quarter from $48.6 billion the quarter before, as rising receivables tied up $22.3 billion.
Cheap, with a catch
Investors have noticed. After an 11% drop in the past month, NVIDIA trades at about 17x forward earnings. That’s its lowest in five years, and less than half its five-year average of 36x:
That’s even though analysts have raised their fiscal 2028 earnings estimates 25% since the end of June.
At the end of the day, I think Galloway’s FTX comparison goes too far: NVIDIA could cover its Meta check many times over from one year’s cash. But he’s right that a big share of NVIDIA’s demand now rests on money it supplies. If those labs stumble, NVIDIA loses the sales and picks up their bills at the same time. So I’d call the 17x discount deserved until NVIDIA’s customers show they can pay their own way.
Watch the receivables on Nov. 17
NVIDIA reports its fiscal third quarter on Nov. 17, against revenue guidance of $108 billion, plus or minus 2%. I’ll be watching days sales outstanding more closely than revenue. Another quarter above July’s 60 days would mean customers are leaning even harder on NVIDIA’s payment terms.
I’d also watch Anthropic’s IPO, which Reuters reports is planned for mid-November. It would let a lab NVIDIA has put $10 billion into raise money from public investors, which would take some pressure off its backers.
Of course, if the labs NVIDIA backs keep growing and paying their bills, owning the bank could turn out to be one of the best investments NVIDIA ever made.
So what is NVIDIA stock actually worth?
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