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Nvidia’s market capitalisation of roughly $3tn has occasionally made it the biggest company in the world. Founder Jensen Huang, a man rarely short of self-confidence, hinted this week at plans that could make it even bigger.
At Nvidia’s annual, festival-like GTC conference on Wednesday, Huang said he expected his company to spend around $500bn on electronics over the next four years. Of that, “several hundred billion” could be produced in the US. This is the kind of remark that plays nicely to the America First agenda of President Trump, who promptly used Nvidia’s remarks as proof of a manufacturing renaissance.
In an industry that thinks in trillions, it’s easy to become blind to such numbers. Gripped by an artificial intelligence boom, market capitalisations and investment budgets have spiralled upwards. But there is not a line in Nvidia’s expenses or cash flow statements for which $500bn, even spread over four years, wouldn’t be a whale of a sum.
So where would the money go? Most likely to suppliers, including companies such as Taiwan Semiconductor Manufacturing Company which makes the chips that Nvidia designs. Huang’s mooted sum would be a big step up. Nvidia will spend just $270bn on manufacturing inputs over the next four years, according to consensus estimates from Visible Alpha. Half a trillion would therefore imply chips output that’s twice what analysts expect.
Money might also be earmarked for investment by Nvidia itself, in the form of capital expenditure. But that too would be a major swerve. Its own capex for the past four years adds up to just $7bn. Huang’s company currently has just $6bn of fixed assets, compared with chipmaker Intel’s $108bn. Yet Nvidia’s enterprise value is 20 times that of its rival, showing how much investors value its asset-light approach to cutting-edge silicon.
The fact Nvidia’s shares barely moved on Thursday suggests investors aren’t looking too deeply into Huang’s claim. It might be because they are so used to hearing executives talk about large, ill-defined spending plans. Huang’s $500bn happens to be the same sum Apple’s Tim Cook and OpenAI’s Sam Altman have each pledged to spend in coming years, both with an emphasis on helping Uncle Sam regain his former greatness.
It shows how AI has turned the financial world on its head. In the past, investors would be happy to hear that a company planned to spend less on inputs or capital expenditure. Now, they don’t even flinch when executives dangle the idea of truly transformational cash outlays, the more ambitious the better. Huang is just the latest to join a growing high-rollers’ club.
john.foley@ft.com
