Ben Emons, founder of FedWatch Advisors, sees China as the biggest threat to Jensen Huang’s ambitious plan to turn Nvidia Corp’s (NASDAQ:NVDA) AI infrastructure into an asset class capable of supporting hundreds of billions of dollars in Wall Street financing.
China Could Threaten Nvidia’s $500B AI Financing Bet
Emons warned that China’s rapidly expanding domestic AI computing capacity could eventually flood the market with lower-cost chips, triggering a price war that would erode the value of Nvidia GPUs used as collateral, CNBC reported on Tuesday.
That creates a major risk for Nvidia’s new financing strategy.
On Monday, Nvidia partnered with Apollo Global Management (NYSE:APO), BlackRock Inc. (NYSE:BLK), Blackstone Inc. (NYSE:BX), Brookfield Asset Management (NYSE:BAM), Goldman Sachs (NYSE:GS) and KKR & Co. Inc. (NYSE:KKR) on financing platforms designed to mobilize more than $500 billion for AI infrastructure.
The initiative aims to help companies, including startups and cloud providers, finance the cost of expensive data centers and GPU clusters.
Huang’s argues that Nvidia’s AI infrastructure is an "investable asset" because it generates revenue and can support workloads across cloud providers and AI models.
But Emons believes depreciation could undermine that thesis.
Nvidia GPUs Face Depreciation Risk
Unlike buildings or other traditional infrastructure, cutting-edge GPUs can lose value quickly as newer chips arrive. Older processors may eventually shift from frontier AI training to lower-margin inference workloads, reducing their resale value.
That becomes especially dangerous if Chinese chipmakers offer cheaper alternatives.
If GPU values plunge while borrowers still owe billions of dollars in financing, Wall Street lenders could be left with collateral worth significantly less than the outstanding debt.
Emons estimates investors could therefore demand high-yield returns of roughly 11% to 17% to compensate for the risk.
Nvidia Still Has a Major Advantage
For now, Nvidia remains the dominant U.S. AI chip supplier, while demand for its processors remains strong. Huang has also argued that Nvidia’s CUDA software ecosystem can keep older GPUs productive for longer.
The company has another advantage. U.S. restrictions have limited access to leading Chinese AI chips, including Huawei Technologies’ Ascend processors.
BofA Sees Nvidia Earnings Beat and 56% Upside
Nvidia is scheduled to release its second-quarter results on Aug. 26.
In a note published Monday, Bank of America analyst Vivek Arya maintained Nvidia as a "top pick" and reiterated a $350 price target, representing a 56.3% upside from the stock’s $223.96 price at the time.
BofA forecasts Nvidia’s quarterly revenue at $94 billion to $95 billion, about $3 billion to $4 billion above the company’s $91 billion guidance.
The bank also expects third-quarter revenue guidance of $107 billion to $108 billion, ahead of the roughly $104 billion consensus estimate.
Price Action: Nvidia closed at $217.50 on Tuesday, down 0.02%, while the stock rose 0.67% to $218.96 in Wednesday’s premarket trading, according to Benzinga Pro.
According to Benzinga Edge Rankings, Nvidia ranks in the 99th percentile for growth and maintains positive short-, medium-, and long-term price trend ratings. Benzinga’s screener lets investors compare Nvidia’s performance against its industry peers.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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