In an unusual move, Nvidia’s CEO Jensen Huang sent a rebuttal letter to major investors addressing concerns surrounding the “AI bubble” theory. This seven-page letter aims to fact-check and counter various allegations against Nvidia, which is seen as a rare action in the industry.
Huang’s letter emphasizes that Nvidia’s stock buyback since 2018 was done at an average purchase price of $51, thereby maximizing shareholder value. Furthermore, the company refuted claims that an increase in accounts receivable was due to unpaid customer transactions, stating that there were hardly any overdue debts.
Regarding the recent increase in inventory, which some interpreted as a slowdown in AI demand, Nvidia explained it as a strategic advance in securing supplies in preparation for the launch of their next-generation AI chip, Blackwell.
In terms of cash flow conversion, Nvidia clarified that critics misunderstood the figures, asserting that the company’s Q3 operating cash flow was strong. It also addressed the controversy over “circular investments” with other companies by highlighting that startup investments accounted for only 3-7% of total revenue, which makes revenue inflation improbable.
Moreover, the recent sale of Nvidia stocks by major investors like Peter Thiel and Masayoshi Son was mentioned as unrelated to internal company issues. Additionally, Nvidia explained that major customers such as Google, Amazon, and Meta amortize their equipment over four to six years, aligning with industry standards of two to seven years, in response to discussions about hyper-scalers’ depreciation practices.