A Blueskier turned me onto a new Substack from a guy named Shanaka Perera who dug into the reversal of sentiment from NVIDIA’s Q3 earnings release. It’s the ultimate careful what you wish for because he identifies how AI algorithms—essentially digital quants—ripped through their 10Q to uncover irregularities that belied the growth narrative.
The initial euphoria—driven by superficially strong revenue growth—gave way within hours to a stark reassessment as quantitative analysts dug into the balance sheet mechanics. They found accounts receivable growing faster than revenue, a troubling uptick in days sales outstanding, and inventory accumulation that suggested demand might not be as ironclad as the bulls believed.
These accounting red flags reveal something fundamentally different from NVIDIA’s prior growth quarters, when cash conversion was nearly instantaneous and inventory turned over at breakneck speed. In the early days, customers were desperate to secure supply, paying upfront and accepting whatever allocation they could get. The recent shift toward extended payment terms and rising receivables suggests that bargaining power has started to migrate away from NVIDIA. Customers are negotiating harder, taking longer to pay, and perhaps even showing signs of order fatigue. For my money, the inventory build is more concerning—either demand forecasting has become less reliable, or orders are being pushed out, forcing NVIDIA to hold more chips on its books. Either way, these are classic symptoms of a market transitioning from supply constraint to something more balanced, or worse, oversupplied.
This is why the stock hit a wall after the initial pop. Sentiment and Wall Street’s “who gives a shit” attitude might drive it up again in the neverending pursuit of yield but these are accounting fundamentals that cannot be ignored. So the big question now is if NVIDIA’s metrics are showing stress at the peak of the AI buildout, what happens when capital expenditure growth inevitably moderates?
But NVIDIA’s stumble is merely one symptom of a broader reckoning coming to the AI market. The stories are mounting, and they’re starting to cohere into a troubling narrative. China’s DeepSeek and other domestic players are rolling out models that perform comparably to Western offerings at a fraction of the cost, threatening the pricing power that has justified astronomical valuations. So how long will U.S. protectionism last, particularly when you have a president that treats NVIDIA chips as bargaining chips in trade negotiations?
Meanwhile, public anger is building over the energy demands of data centers, with communities from Virginia to Ireland pushing back against the grid strain and environmental costs.
Perhaps most insidiously, the circular investment pattern among the hyperscalers has become impossible to ignore. Microsoft invests in OpenAI, which buys compute from Microsoft Azure, which purchases chips from NVIDIA, which benefits from capital flowing from Microsoft’s cloud business. It’s a closed loop that creates the illusion of organic demand while potentially masking what happens when any link in the chain weakens. Add to this the off-balance-sheet financing schemes, exemplified by Meta’s creative accounting around AI infrastructure investments, and you have a sector where the true economics are deliberately obscured. These structures let companies trumpet massive AI spending while smoothing the impact on reported earnings, but they also make it harder to assess whether AI capital deployment is generating real returns or simply inflating asset values that will eventually require impairment charges.
Against this backdrop, Google is quietly emerging as the likely winner. Unlike its peers who are levering up or resorting to financial engineering, Google can fund its AI ambitions directly from operating cash flow—most recent figures estimate that Alphabet, Google’s parent company, has $150 in annual operating cash flow. This financial fortress matters enormously in a capital-intensive race, but Google’s advantage runs deeper. Its entrenched position in search, its integrated AI capabilities through Gemini, and its cloud infrastructure create network effects that are proving difficult to replicate. The company that was once dismissed as a lumbering incumbent is now pulling away precisely because its scale and profitability allow it to outlast competitors in what increasingly looks like a war of attrition.
Even Sam Altman seems to sense the shifting winds. His recent comments about needing government to serve as an “insurer of last resort” for AI development represent a remarkable pivot from the techno-optimist who once promised that AGI would unlock unlimited abundance. The coded language suggests a dawning realization that the private capital model may not be sufficient to sustain the enormous costs and uncertain timelines of frontier AI development. When the industry’s most prominent evangelist starts hedging his bets and looking to taxpayers as a backstop, it’s worth paying attention. The AI story isn’t over, but the easy money phase certainly is.
I’ll finish with a familiar note to drive this home before turning the page. AI adoption is the ultimate lose-lose for the American worker. If it succeeds then mass job displacement is imminent. If it fails, then the opportunity cost of a trillion dollar capital investment into an energy sucking, environment destroying technology boom is the further decline of our social and physical infrastructure. Either way, it’s increasingly clear that our obsessive investment is going to end badly.
Other things I’m obsessing over…
When I’m blue I remember that this exists. “History quickly crashing through your veins. Using you to fall back down again.”
Among the theories behind MTG’s resignation is the increasing scrutiny on her INCREDIBLY well-timed trades. Her disclosures upon entering public office showed a net worth in the range of $700k. She’s leaving with an estimated net worth of $22 million. The really crazy part? She still doesn’t crack the top 50 in Congress.
Sherrod Brown is running for JD Vance’s old seat. For this and many other reasons, if you’re going to donate to a politician (I’m not saying you should or shouldn’t, just if you’re going to) here’s where you can do it.
-Max
Killer Left Take of the Week
KLTW goes to Jordan Chariton of Status Coup News and Professor Richard Wolff in a wide ranging discussion that includes an important segment about the mystery that is the Democratic Party. The message is right there. Under their noses and in plain sight. And all the party can muster is a (losing) fight over maintaining tax credits for a policy that was already doomed.
The Political Response We Need to This Financial Crisis.
The U.S. economy has already crashed. The stock market is just the last one to figure it out. In this essay, Max talks about what happens when hegemonic economies collapse and how the U.S. has been able to keep things afloat while the bottom falls out. He draws parallels to the crash of 1929 and the subsequent Depression and speaks to the differences. There is a path forward for Progressives but it won’t be a presidential run. The DNC will make sure of that. But we can borrow from Russell Vought’s playbook to build a coalition of support on the ground.
Here’s a snippet from the pod:
Max: Russell Vought believes that America’s salvation lies in having a heavy-handed theocratic dictator in charge. Donald Trump is the bridge, not the endgame. In fact, Vought is on record (secretly) lauding the selection of JD Vance because he and people like Peter Thiel and Steve Bannon believe him to be their man on the inside. Waiting. Biding his time. The political miscalculation, of course, is that Vance possesses neither the skill nor the gravitas to manage an enterprise on the scale of the United States. We may be an empire in decline, but we’re still an empire.
This episode will be released later today!
Chart of the Week
The inputs in this Forbes article are as stunning as the conclusion the author draws, especially when you consider that it’s a Forbes article.
Here are some of the stunning excerpts from the author’s analysis:
“In order to bring retail prices down to 2019 levels, grocers would have to sell nearly everything at or below their wholesale costs.”
“Food prices have jumped 25% since 2021, while food consumption volumes are down over 5%.”
“In 2019, a basket of the top 10 items cost $36. In 2025, $56.”
“Four or fewer corporations controlling 60-85% of meat processing, 93% of soda, 80% of candy, 75% of yogurt, 72% of breakfast cereals, 60% of snack bars, 66% of frozen pizza and 60% of bread.”
All pretty eye opening, right? Nothing here is as surprising as the last line of the article…
“Inflation has made public groceries inevitable.”
Unf*ckers. We’ve crossed the Rubicon. We’re in Zohranland now baby.
Headlines
Junk Insurance
There were never GOP working groups to develop a better national health insurance coverage plan. There was no real attempt to find a replacement for Obamacare after its repeal. There were votes to “repeal and replace” and empty promises of something “beautiful” to take its place. But there was no plan. That’s because Obamacare was the GOP plan. And it staked its political future on tearing it apart after it was implemented by a Democrat. So now we have junk options in its place after the GOP finally dismantled the ACA.
From the article:
“Indeed, one of the options Republicans are pitching for patients without insurance is enrolling in ‘short-term’ or ‘junk’ insurance plans, which are not required to cover pre-existing conditions. Officials in five states have barred these products. But the Trump administration relaxed the rules governing them in August.”
Japan, Germany and Canada don’t want them. Each has the capability to make them on their own if they did. One of them already has some of ours. None of them were asked whether this was a good idea. And yet, authors of a recent Foreign Affairs article make the case that we need to supply these countries with nuclear weapons. Can we just stop fucking spreading nukes around the world?
From the article:
“All three of these countries are covered by what’s called ‘extended deterrence,’ which means that, should they be the target of a nuclear attack, the United States will, at least in theory, target the attacker with its own nuclear weapons. In some cases, this goes further: Germany hosts US nuclear weapons at military bases in the country and Canada participates in joint military planning with the United States under the binational North American Aerospace Defense Command.”
As the U.S. races to normalize crypto exchanges, nefarious actors are still having a field day laundering funds through them. This would, of course, include the Trump family. The only solace in watching Bitcoin take a shit right now is knowing Don Jr. and Eric recently bought a Bitcoin mining operation.
From the article:
“Over the past 10 months, ICIJ and its partners collected hundreds of crypto wallet addresses — analogous to bank account numbers — associated with North Korean cyber thieves, Russian money launderers and large-scale scam operations. Using the wallet addresses, reporters traced tens of thousands of cryptocurrency transactions recorded on digital ledgers known as blockchains and found that illicit actors had either set up accounts at some of the biggest exchanges or sent tainted funds to accounts there.”
“For nearly a century, GDP has been the world’s go-to measure of economic success—but what if it’s been telling us the wrong story? It treats cigarette sales and cancer treatments as equally ‘good’ for the economy, while caring for your kids, volunteering, or creating art don’t count at all. This week, economist Diane Coyle joins Nick and Goldy to discuss her new book, The Measure of Progress, and explain why GDP increasingly fails to capture the reality of modern economies—and how we can measure real progress instead.”
“Since the days of the dot-com bubble in the late 1990s, no industry has made a greater impact on the world than Silicon Valley. And few individuals have done more to shape Silicon Valley than Peter Thiel. The billionaire venture capitalist and entrepreneur has been a behind-the-scenes operator influencing countless aspects of contemporary life, from the technologies that mediate our daily existence to the rise of the far-right effort among some of the most powerful people in Silicon Valley and Washington to untether the U.S. government from the established constitutional order.”
“This youth-led nonprofit seeks to educate, empower, and engage Gen Z with politics and government. With chapters in 20 states and a volunteer presence in all 50, it takes a locally based, multifaceted approach to engaging young voters. It conducts surveys to gauge views on various topics, then uses these insights to guide mobilization strategies and shape its legislative platform, the Gen Z Agenda.”
THAT’S A WRAP! Our Fall Fund, Friend, and Hell Raiser has come to a close and Unf*ckers came through in a big way! We came in just shy of our 600 member goal, but it was still the best fundraising period we’ve ever had. (That’s why they call ‘em goals. The triumph is in the struggle!) More than that, we broke 5k on Bluesky, 8k on Instagram and are thiiiiis close to hitting 100,000 subscribers on YouTube. So big ups to…
Thank you to our newest members:
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