Instead Of Lowering GPU Prices, Former NVIDIA CEO Financed AI Startups To Absorb Excess Silicon, Shattering The Shortage Perception

https://wccftech.com/jensen-huang-financed-ai-startups-absorb-excess-silicon/ Now that NVIDIA’s Jensen Huang is no longer the company CEO, we have some truth behind the exponential rise of semiconductor and memory prices. According to the latest findings, it appears that we were led to believe that there was an organic supply shortage, but in reality, we learn that Jensen was actually leveraging NVIDIA’s own balance sheet to finance AI startups and datacenter buildouts so they could absorb the company’s over-ordered semiconductor shipments from TSMC. NVIDIA faced an “avalanche” of excess TSMC silicon and memory, and the only way to curb the oversupply was to fund AI startups The fresh revelations stem from a tense August 2026 confrontation between Huang and NVIDIA’s longtime Chief Financial Officer, Colette Kress, now the interim CEO. Seeing as how the former head honcho was escalating the GPU maker’s financial exposure, Kress pushed to rein in the company’s “circular financing” commitments to smaller cloud providers and major AI firms such as OpenAI and Anthropic, according to The Wall Street Journal. Initial discussions had floated underwriting roughly 8 gigawatts of OpenAI compute valued at up to $250 billion, and Kress successfully scaled NVIDIA’s signed guarantee cap down to roughly 4.25 gigawatts, or up to $125 billion. As a result, Jensen reportedly belittled Kress for questioning the deals, referring to her as “a deer in the headlights.” To justify NVIDIA's need to financially underwrite OpenAI and smaller cloud operators to keep them purchasing its GPUs, Huang privately admitted that major cloud giants were pivoting away from NVIDIA in favor of in-house custom chips. With hyperscalers actively reducing their reliance on “off-the-shelf parts,” Huang acknowledged that the massive volume of prepaid TSMC wafers and memory NVIDIA had committed to buying was “coming at him like an avalanche.” By funding datacenter expansion for AI startups, NVIDIA effectively created artificial demand to clear out its own surplus silicon instead of letting the supply flood the market and force GPU prices down. Those internal pressures align with earlier assessments from industry analyst Ed Zitron, who estimated that at least $200 billion worth of NVIDIA AI GPUs are sitting idle in warehouses after being purchased by cloud giants that lacked either the electrical grid capacity or immediate end-user demand to power them on. Amazon faced a similar dilemma. Knowing that the imminent avalanche would be upon NVIDIA sooner rather than later, the company reportedly contacted TSMC to wind down its upcoming chip orders. For PC builders and hardware enthusiasts who have endured years of steep GPU and RAM pricing under the impression of severe component scarcity, the disclosures shatter the shortage narrative and expose the aggressive financial maneuvering used to keep hardware prices elevated. While Jensen can’t be faulted for making these moves because he was keeping the best interests of the company in mind, it’s a stab in the back for gamers and hardware owners who are unable to locate any mouth-watering deals for GPUs or memory because of the perceived shortage. News Source: The Wall Street Journal END OF ARTICLE —- So what Nvidia did is they would tell people: "Hey, we know you want to do an AI data center, but if you don't buy the chips now, you won't be able to get any when you need them!" Companies didn't want that to happen, but didn't have enough money to buy the chips so Nvidia cut them a deal: "Tell you what, we will invest in your company. You give us some equity and promise to use the money we invest in you to buy chips from us." But the investment wouldn't fully cover it so they would have to get a loan from a bank. They need collateral for that and a bunch of chips sitting around doesn't cut it. So Nvidia would go to the bank and say: "If you give them the money for the chips, we will co-sign because we made a deal that if they can't rent out the chips, we will rent them out for them!" Nvidia is basically doing a pseudo ponzi scheme. They are paying companies to take their chips and then will either benefit by having equity in a successful company or reclaim the chips they essentially bought themselves and sell them off to the next sucker. Also, it’s more insidious than this. If he was artificially inflating the price of GPUs then he was artificially inflating the price and cost of AI everywhere. AI companies and their stocks are based on their costs and hardware costs are the main driving factor and limit. If those prices are artificially inflated then that’s means the entire AI industry has paid for severely depreciating assets (even more than computers normally are). All that capital that is backing those companies that they are taking out massive debt for is now worth a fraction of what they paid. The banks will come to collect. When that happens the AI market will normalize (crash) and the bubble will burst and fuck over the entire economy.