More Tales From Nvidia: Sex, Lies and Nvidia (Issue #272!)
* Historically bailouts occur after the wipe out and not before it…
“You can’t possibly trust him.”
– Ann Mulllany, Sex, Lies and Videotape
This is my 272nd “More Tales From Nvidia” over the last two years.
Contrary to my repeated concerns and specifically stated headwinds, there has been near-universal optimism on the prospects for Nvidia’s (NVDA) share price from the sell side:
But, that was then and this is now…
As noted late last week, it’s Krispy Kreme (DNUT) for the win (over Nvidia)!
More Tales From Nvidia: Krispy Kreme for the Win! (Issue #271!)
Huang vs. Huang: It’s Not a Family Affair
AI is a circularly financed industry on many levels, including the underlying VC-financed businesses that feed into it.
Nvidia is at the center of it.
The amount of money they have thrown at everything, well I refer to them as the “Central Bank of Nvidia” in a previous “More Tales:”
The Most Powerful Banker in the World? The Central Bank of Nvidia
Now, the Chairman of the Central Bank of Nvidia (Jensen Huang) who is in the middle of the whole thing has been caught consorting with Alice Huang at the exact same time as those who seemingly were protecting him were put out of the protection business.
Jensen Huang In China Spy Row? Espionage Allegations Rock NVIDIA CEO | News9
To make matters worse, it sounds like Secretary of State Marco Rubio knew about the Nvidia spy for a while and drafted a memo about it to warn the entirety of the administration. But the administration still decided to look the other way while Jensen Huang was allowed to continue to lobby and influence the White House and national policy, probably in part because he was telling them that Nvidia and AI were important for the equity market:
https://www.nytimes.com/2026/11/08/us/politics/rubio-nvidia-ceo-chinese-spy.html
Now under clear pressure, the Nvidia board decides to investigate.
This is called being a little late to the party.
I have a hard time believing they too didn’t know what was going on, and decided to look the other way. Further, I find it even harder to believe that they didn’t know Nvidia parts were likely making their way to China in various ways indirectly or via third party-hosted access, for a long time and in significant volume, in ways they weren’t supposed to. But I guess they had plausible deniability. They no longer do.
They are doing this to protect themselves, as much as anything else, in my view. If they were serious Jensen Huang would be asked to take a vacation while this investigation is occurring given the gravity of the situation as well as all the other extra-curriculars including the circular financing which puts the company at risk, the boob signings, him running around like a PT Barnum stock promoter all the time, and of course where chips seemingly have been going as well.
In my view, you cannot allow him to continue to run the company with this issue unresolved, but with enough to go on to know this was no bueno, on top of all the other stuff. If a junior employee was found doing this stuff, would they be allowed to keep their job while the investigation was going on, or would they be told to stay home? Shouldn’t the CEO, with access to the most information and with the most power be held to the highest standard of anyone? Heck even the NFL makes players sit out while they are doing investigations under their personal conduct policy and puts players on the commissioner’s exempt list. Football is a lot less important than this issue. When a parent is being investigated for child-related harms, the child can be taken away from the parent in order to protect the child until you know in fact it is safe, if it is safe at all:
Nvidia opens investigation after report CEO Jensen Huang was target of foreign intelligence
As far as Jensen’s statement, I find his reaction to be quite pathetic. He is seemingly trying to position this as an extramarital affair, and leads with all of the stuff about his wife and children, to try and garner sympathy and deflect from the real issue. I find it not only to be pathetic, but also misleading. He is not being investigated for an extramarital affair. He should handle his personal apologies and life privately, and stop using his wife and children as a tool to deflect from what he did. If I were his wife (and kids), I would be more pissed that I am now being used as a diversionary shield and publicly embarrassed at the same time.
Frankly, the public does not give a crap about this part of the issue nor is it our business. My guess is this may not be the first time for the boob signer either, that boob signing told you something in my view:
Back to the Deteriorating Fundamentals
Big picture it is important not to forget the whole AI trade and underlying fundamentals were badly coming undone prior to the election, even with the full policy support of the U.S. government intact. Token prices were cratering, open source was gaining share, the SOX had rolled over, the financing markets were blowing up badly, public companies were showing deceleration and missing numbers, OpenAI was struggling to raise money, Anthropic’s biz had already slowed and their S-1 and IPO process were off to a terrible start, the balance sheets and cash flow statements of the big public companies were coming completely undone (GOOGL, META and AMZN all cash flow negative), and the underlying technology was showing all of its holes, including its inability to scale and the fact that it was a terribly dis-economic money loser and not doing what it was supposed to do.
Policy support was really what drove the big second leg of this trade. The AI story was already starting to decelerate and roll over in early 2024 due to the fact that the technology was showing its warts. It was not scaling, and it was not doing what it was supposed to do, and it was clearly dis-economic. But then the U.S. government came in and threw all their might behind this whole thing, which resulted in the post-Liberation Day reflexive investment boom inclusive of all the circular financing and stock price moves, that fed on each other (while insiders sold hand over fist the whole time).
People think about bubbles in different ways. There are P/E and sales multiples, there are earnings bubbles, but there are also market cap and cumulative invested capital bubbles, which is what I think is the most important metric in the case of AI. If you look at the invested capital and the market cap ascribed to this space, it dwarfs dot-com. Importantly, at least in the case of dot-com, the underlying technology was solid, and had lasting value. Even the fiber laid back then is in place and in production now.
The chips and compute put in place for Gen AI and LLMs, forget it. As I said in my last “More Tales,” Gen AI and its underlying compute are the equivalent of Unix, Sparc, and Mainframes or Vax. At any rate, the public market cap and capital invested plus the private capital invested into and the paper valuations of the junk venture startups in this space make dot-com look like nothing.
In summary, even prior to the election this whole thing, which is a bubble that dwarfs dot-com, was imploding of its own weight, even with the full policy support of the U.S. government. That policy support is what kicked off the bulk of the reflexive investment boom which started in 2024 that really blew up the bubble. Now the trade that was already coming undone due to its own weight will lose its policy support, and on top of it all the chairman of the central bank of Nvidia that was financing this whole thing was busted for canoodling with a Chinese spy. Talk about a triple whammy. This is not the second derivative going the wrong way. This is like three first derivatives going the wrong way, while you have about the biggest bubble in history.
Hollywood could not have dreamed this thing up.
As the desperation continues, here comes the “government who is going to bail out AI” comments from the stock promoters on “comedy central,” like this one, because it is a “national security issue” and China will eat everyone’s babies if we don’t do it:
The whole notion is absurd. Even if the elections didn’t go the way they did, there was no way the government would bail out the whole thing. Now, you can absolutely forget about it.
Further, the underlying notion that AI would be bailed out by the government absorbing Anthropic and OpenAI, for example, at a $2 trillion valuation each, and rewarding all the existing equity investors, and on top of that continuing to fund the entire ecosystem apace — is also absurd. This is basically what is being implied by the current bailout argument, because that is the only thing that would keep the stocks going.
Things are only bailed out, AFTER they are wiped out. Like in 2008, bailouts happen after the carnage, not before it. The bailout is the business whose equity was wiped out is absorbed by a larger surviving entity, whose price was also severely damaged along the way, even though they survived.
Anyone wishing for a bailout is wishing to be wiped out first. It makes no sense.
Then Gen AI and the national security and China issue are not what they are meant to be.
How is Meta (META) spending $500 billion or whatever it was to build Muse a national security issue? Personal shopping agents are really life or death for us? How are all these garbage VC startups that apparently consume about 70%-80% of the tokens from Anthropic and OpenAI a national security issue?
How is it a national security issue for Meta to get this absurd AI tax credit, by claiming its data centers are for research and experimentation, especially when they are turning around and using them for a personal agent like Muse? Good luck with that one holding up, especially now. My guess, they are going to owe the money back, which is in the billions, and their EPS will take a hit too going forward when the tax rate moves back up. Good thing they sold all that equity!
https://www.nytimes.com/2026/09/30/technology/meta-ai-data-centers-taxes.html
How is it a national security issue to throw trillions of dollars at a dis-economic and broken technology? Gen AI software is UNIX, the chips it runs on are SPARC, and the compute infrastructure is the equivalent of a giant mainframe or VAX. Things change over time. Throwing trillions of dollars at a first-generation technology is never a good idea. Way too much, way too soon.
It is NOT in our national security interest to keep throwing this amount of dollars at a broken technology that does not scale.
Sure, we should have some of it, but we did not need this much, in all the places it is, in all of its various forms. The wagon was hitched to the wrong thing by the U.S. government, as usual, and done to too much of a degree, as usual. Just like with Green Energy, and mRNA and all the hype around those stocks too. In both cases, the equity investors also largely wiped out. The U.S. government continues its perfect track record of being the world’s worst allocator of capital.
It would have been in our national security interest to do this more slowly, not start the rat race with China who also took the cheese, and instead throw more of the dollars behind alternative approaches (Neurosymbolic AI, World Models, etc) that might be more effective, more economic, less resource consumptive, and deliver more value and ROI and actually do the things we were told Gen AI was supposed to be able to do.
It is in our national security interest to have a strong economy. Lighting capital on fire is never good for the economy or national security.
Then, if we are really concerned about national security and China as a threat, why do we continue to let any Nvidia chips go to China, both directly, and indirectly? This includes the chips that are not supposed to go there, but something tells me continue to be accessed via various means. The Jensen Chinese spy story is one more interesting wrinkle in this regard.
Something tells me, Jensen Huang, who had access to the White House, was telling them that they better keep letting him do it, because he alone is 8% of the S&P, and AI-linked stonks might be 40%-50% of the S&P. So the White House kept allowing him to do some stuff and sell second gen chips into China, while probably looking the other way on the various ways China could skirt the export controls on the first gen chips, and looked the other way on some other things as well. No way Jensen can continue to be a White House advisor, in my view. He is clearly very self-interested, at a minimum. If he was so smart, he would have learned from Eric Swalwell.
If we are so concerned about national security, all of this should be cut off, including all the indirect means China has of getting their hands on this stuff. My guess, the going is going to get tougher in this regard.
Position: None
BY Doug Kass · Nov 9, 2026, 7:00 AM EST
