The NVIDIA BOOBY-TRAP?
NVIDIA gets paid in cash. Someone holds the IOU. It might be you.
According to the lenders, NVDA 0.00%↑ GPUs age like a fine single malt scotch. Depreciation is for suckers.
Here is the problem. The chips made by NVIDIA, owned by the guy who signs women’s chests, do not age with time. They age with replacement chips. Which are made and shipped by NVDA 0.00%↑ itself. Imagine the farce.
So, Jensen Huang is the Casanova of GPUs? Every chip is the love of his life until the next one ships?
The Problem We Keep Seeing In the PC Loan Books - And the Real Suckers in All of This:
As we continue to review the private credit loan books, guess the name that keeps popping up? NVIDIA (among others).
Here is what we also realized: an NVIDIA chip doesn’t get old with time. It gets old when the next NVIDIA chip ships. NVIDIA sells the asset, controls the upgrade cycle, and gets paid in cash. The clients who couldn’t pay cash carry the debt, and private credit carries the clients.
No, it is not that simple.
NVIDIA sells chips for cash. Its most ‘poorly-rich’ customers, the neoclouds and xAI, can’t pay cash, so private credit funds lend it to them, secured by the chips the loans are buying. The collateral is borrowed into existence. The loan buys the chips. The chips back the loan.
The “genius” lenders are Apollo, Blackstone, Magnetar, Coatue, Carlyle, Macquarie. There are more than $20 billion in GPU-backed debt, according to analyst estimates, and we think that’s likely low. CoreWeave alone carries $24.9 billion of total debt, added $8.5 billion in one quarter, and pays 26 cents of every revenue dollar in interest.
NVIDIA sits on every side of the trade: it makes the collateral, controls its depreciation through the annual release cycle, and puts equity into its own borrowers, $2 billion more into CoreWeave last quarter, an anchor LP in the vehicle buying its own GB200s for xAI.
For us, the whole structure rests on one unanswered question: what is a repossessed GPU worth?
The lenders’ own industry debate runs from 10% to 60% residual value after three years. To be blunt, the 10-60 spread isn't just about pricing. It's about whether there's anything there at all.
The debt reaches retail through a listed BDC (Great Elm) in CoreWeave’s syndicate at origination, a $14.4 billion wealth-channel fund (ADS) where we traced the VCI exposure, and annuity accounts buying GPU lease paper.
We went through Apollo’s ADS filing. The warning is right there. Markdowns wiped out more than the entire quarter’s income. The distributions went out anyway. PIK tripled. And money is now leaving the fund faster than it comes in.
Who loses when it cracks: not NVIDIA, which was paid up front. Not the managers, who earned fees building the exposure. Not the hyperscalers, who offloaded the capex and will buy distressed compute cheap. The loss lands on the capital furthest from the deal, with the least information about holding it: the annuity holder, the wealth-channel client, retail investors, retirees, and the private credit shareholders.
Here, in the realm of this private credit, risk migrates toward whoever can’t see it. That is usually the retail investors and retirees.
Behind the paywall: the full deal-by-deal roster with sourcing status on every claim, both sides of the residual value evidence, the transmission math back to NVIDIA, and the fresh ADS 10-Q showing a $14.4 billion retail fund in net outflow while it marks down its book. Position-level work on the VCI exposure comes next, for subscribers first.