The Ultimate AI Debate

The NVIDIA bulls are panicking, and the letter they sent the board on Friday proves it.With a federal investigation open into whether advanced American AI chips were smuggled into China, 2 of the loudest voices in the AI trade are lobbying to keep the door open for the man who was running NVIDIA the whole time.This is a national security issue, and every American should be furious about it.Silicon Valley has already told you how dangerous this technology is. Anthropic's IPO filing with the SEC warns that advanced AI could pose "catastrophic or existential risks to humanity," especially if it's misused or weaponized, and its CEO has put the odds that AI destroys humanity as high as 25%. NVIDIA's chips are what it takes to build those systems, so by the industry's own words, any of those chips ending up in China is a threat to every American.Brad Gerstner of Altimeter Capital and Gavin Baker of Atreides Management asked the board for a “slow, measured, and deliberate process” that keeps every option open, “including the potential return of Jensen Huang.”Gavin, Brad, are you out of your minds? Is protecting your position really more important than doing what’s right for this country?At the end of June, Altimeter held nearly $1.9 BILLION of NVIDIA stock, which made it the firm’s largest disclosed holding, and Atreides held nearly $250 million more. That’s $2.13 BILLION riding on this stock, so it’s easy to see who this letter is really looking out for.Huang resigned on Thursday after reports tied him to a woman U.S. intelligence believes was recruited by China’s Ministry of State Security. She used to run Megaspeed, a Singapore company that bought billions of dollars of NVIDIA hardware, and the Justice Department is investigating Megaspeed over potential violations of U.S. export rules on advanced AI chips. NVIDIA denies any part in illegal chip transfers and its board says it has no reason to believe national security was compromised, but the investigation isn’t finished, and these 2 still decided this was the moment to lobby for his return.The whole AI cycle has run on promotion. Silicon Valley’s biggest promoters pump the tulip bulbs so everyday investors will buy them at the top, and that’s how the insiders get their exit liquidity. Exit liquidity means someone has to be on the other side of the trade when the smart money sells, and they’d like that someone to be you.What should scare the bulls even more is the money behind all of this:Under Huang, NVIDIA became the bank of the AI boom. At the end of July, it held $98.9 BILLION of stakes in other companies, many of them its own customers, and in the first 6 months of this fiscal year it booked $23.7 BILLION of gains on those stakes. Some of that money went to neoclouds like CoreWeave, which turned around and bought more NVIDIA chips.I’m confident the interim CEO and the new board chair will be far more careful about handing out that kind of financing after this week, and with every chip distributor in Asia under a microscope, the demand that was quietly finding its way to China gets a lot harder to fill too.Once that money slows, I think the neoclouds start filing for bankruptcy, and NVIDIA’s revenue lands 30% to 40% short of what it would have been, with the growth rate falling apart right behind it.We’ve been short the neoclouds since June, and CoreWeave is down 50% since we called it. NVIDIA reports on Tuesday, and I expect AI stocks to get hit hard into year end, when the big money gets defensive and stops stepping up to take risk. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit georgenoble.substack.com/subscribe

Nvidia was the bank of the entire AI trade, and the bank is now closed.The MUST-READ report below shows how Nvidia kept the music playing. It handed out billions in financial guarantees to AI companies that couldn't afford its chips, so they'd keep buying them. Commitments and guarantees have exploded to $530B, up from $184B a quarter earlier, and that's almost 6 times the $91B of liabilities on its balance sheet.Nvidia plays investor, lender, supplier and backup customer in the same deal, so the money goes out the front door and comes back as sales.Jack Gamble (Nobody Special) and I went through all of it in an emergency episode, and I didn't hold anything back.This has a real Enron vibe to it. My friend Jim Chanos calls self-dealing vendor financing like this legal fraud, since it technically violates no laws and in substance is fraudulent.When the bank of AI closes, the heart stops pumping blood and the whole system dies with it. Colette Kress, the CFO who questioned these deals, now has to open the books completely, because anyone who fails to clean house on their watch owns the mess. Nvidia reports on Tuesday, and the Anthropic IPO lands 2 days later.Jack brought all the receipts:* A report of $200B in GPUs sitting dark in warehouses* CoreWeave's net loss up 544%, with adjusted EBITDA that strips out interest, depreciation and $2.5B of stock compensation on a company that rents GPUs* IPOs from Firmus, nScale and SB Energy flopping or delayed since early October, plus a $3.7B loss at SoftBankI think the entire AI structure is at risk: semiconductor stocks back to book value, neoclouds out of business, and a sector that makes up 40% of the equity market dragging everything else down with it.My advice is to protect your capital first. Avoid tech, get out of the index funds that are loaded with it (which is exactly what your wealth manager doesn't want you to do), and keep dry powder for what comes after.We are also DOUBLING DOWN on our NVIDIA short today! Don't be the exit liquidity. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit georgenoble.substack.com/subscribe

More than $10B poured into Nasdaq 100 and semiconductor ETFs in a single week, right into a falling tech market.If you're a bull, that's the LAST thing you want to see.Bottoms form when people finally give up, and this crowd is still buying every dip with both hands. Now add the calendar: it's November, and a fund manager who's behind for the year isn't going to stand up and take more risk, so every leg down invites MORE selling.And for the AI names, it gets worse…Their stock price is their cost of capital, and it's rising at the exact moment they need more money.Tech is in a bear market, and in a bear market you're either short or flat.We positioned for this early, and we're keeping our foot on the gas.We have big news coming about The Noble Update in the next couple of days, so if you've been on the fence, now's the time to subscribe. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit georgenoble.substack.com/subscribe

This is a free preview of a paid episode. To hear more, visit georgenoble.substack.comIf you missed last night’s emergency subscriber call, you missed a lot.The room stayed packed to the very end of a 70 minute session with Michael Howell, David Trainer, Frank Longman, Michael Kramer and Nobody Special, and the conversation was on fire from the first minute.We talked about:* Where we are in the liquidity cycle, and what to own while it dra…

Before you watch: We're hosting an EMERGENCY subscriber call tonight at 7:30 PM ET.The AI trade is coming apart in real time, and I'm going live with Noble Update subscribers tonight to walk through exactly where I stand. The Zoom meeting details:AI is a wonderful product and a lousy investment, and I went toe to toe with Gene Munster of Deepwater on exactly that in a debate on ZeroHedge.Gene thinks we're in the third inning and called this a buy opportunity. I think the internet already showed us how this ends. The bulls of 1999 were right about the internet, and anyone who owned Nortel, Lucent or Global Crossing still got wiped out.If the payoff on AI were so obvious, the market would hand these companies the money freely. Instead Nvidia has to play the bank of AI and back its own customers so they can keep buying its chips.It's a commodity, the Chinese are doing it for 95% less, and the bond market is already sending the bill.This was a fun debate, and the bulls have nothing left but copium. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit georgenoble.substack.com/subscribe

Wall Street tried to sell WeWork to the public at $45 billion, and weeks after the IPO fell apart, SoftBank put it on its own books at $4 billion.My friend David Trainer of New Constructs was one of the first to call out WeWork, and he thinks Anthropic is the same movie with a much bigger ending. He calls it the final cash out, and we went through exactly how it works:* How your index fund, pension and 401k end up holding the bag* The $900 billion of purchase commitments, roughly 45 times revenue* The vendor costs Anthropic wants kept out of its earnings* The red flag its own auditors raised on internal controls* The shares insiders can sell within days of the IPOThe crash will be EPIC, and David cuts through the noise in this one.Follow David Trainer on X: x.com/theRealD This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit georgenoble.substack.com/subscribe

This is a free preview of a paid episode. To hear more, visit georgenoble.substack.comOur subscriber call last night was TERRIFIC.The election is today, and I told subscribers exactly how I'm positioned for what comes after it. My friend Peter Boockvar joined us too.We talked about:* Why $200 oil is on the table, even if the war ends* What I expect from the market once the election is behind us* The simplest way I know to own uranium* What to ch…

The tech bros are lining YOU up to be their exit liquidity, and the Anthropic IPO is how they plan to do it.Anthropic just disclosed $895B in spending commitments ahead of its IPO, and Robinhood is already fighting for a piece of the shares Anthropic may set aside for retail investors. When the people who got in early want the public holding the bag, you should be angry, very angry.I'll go through all of it tonight on our subscriber call at 7:30 PM EST, along with the process behind our 70% long/short spread.The Zoom details are in the post below: This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit georgenoble.substack.com/subscribe

Energy was up 11.8% and tech was down 2.7% through Thursday, and we were long energy and short tech the whole time.Our long/short spread is now 70.1% (119% annualized), and all 12 of our scored shorts are winners.If all you owned was the index, you got a flat month and MISSED every bit of it.The tide is going out. Money isn’t cheap anymore, so valuation and fundamentals matter again, and the stocks priced on stories are the first to go. I think the tech rout is just getting started.On Sunday at 10 AM ET I’m going live with Noble Update subscribers to go through the portfolio and our process, and to explain why I think SpaceX is about to crash - instructions to join are below and replays will be available:If you missed this week’s Best Technical Ideas Summit, the replay with all 60 ideas is up here: noble-capevents.com/btios-watch-the-replaysThe Noble Update is the #1 place for alpha.I want you to MAKE MONEY. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit georgenoble.substack.com/subscribe

All it takes to break the AI picks and shovels trade is order growth slowing from 30% to 15%. That's STILL double-digit growth, but the stocks can get crushed anyway.My friend Peter Boockvar joined me, and he thinks this is gut check time for the whole trade:* The warning lights already flashing on the AI dashboard, from Chinese chipmakers to scrapped data center IPOs* Why the memory chip boom peaked within weeks of a Chinese rival going public* The credit market pricing a 55% chance that one AI darling defaults within 5 years* The cyclical chip stock that just became the top holding in a major value ETF, and why that should worry you* The most hated sector in the market that Peter loves right nowYou can also watch the full conversation on Youtube: This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit georgenoble.substack.com/subscribe