Nvidia and Micron Make Up 34% of America's Earnings Boom (wsj.com)
143 points by JumpCrisscross 2 days ago
bagacrap 5 hours ago
So someone correct me but I think this is sort of an accounting trick. When Microsoft buys an Nvidia GPU for $100, it will claim that it lasts 5 years, so writes down $20 in the expense column for this year. Meanwhile Nvidia takes all the profit at time of sale, $100. So for each GPU bought, SP500 logs $80 of profit, even though no money entered or left the SP500.
(Yes of course the GPU cost something to make, but the margins on these things are very high. The point is that revenue is immediate while capital expenses are amortized. And capital expenditure has gone way up lately.)
JumpCrisscross 5 hours ago
> When Microsoft buys an Nvidia GPU for $100, it will claim that it lasts 5 years, so writes down $20 in the expense column for this year. Meanwhile Nvidia takes all the profit at time of sale, $100
Nvidia would log $64 of profit against a $100 sale [1]. (The R&D cost to develop the chip have already been booked.)
> for each GPU bought, SP500 logs $80 of profit, even though no money entered or left the SP500
In your example the S&P would log ~$40 of earnings. (About because taxes.)
[1] https://www.macrotrends.net/stocks/charts/NVDA/nvidia/profit...
bagacrap 5 hours ago
Ok great, thanks for clarification. But still, on year 3 of the AI buildout, assuming the pace doesn't accelerate (it's already pretty fast!) then each GPU bought logs $0 profit since it's offset by amortization of the last two years. Compared to $40 of today, profit dropped by $40, meaning earnings contraction is around the corner...? Unless of course Microsoft manages to actually earn $20 or more from each GPU each year.
I suppose the uncertainty here would be the reason for financial market volatility.
JumpCrisscross 5 hours ago
protocolture 3 hours ago
skew-aberration 4 hours ago
What's wrong with this though? Value was created (a physical GPU), so assets go up.
Different people/orgs get a different slice of that value.
sandeepkd 3 hours ago
There is a cost to produce something based on raw materials and then the possible price you can charge from the customer based on demand and supply.
The term Value is pretty vague here. Its more of a perceived value so its hard to put a number against it, there is no direct way to translate it to something more concrete.
May be bit orthogonal, one way I can think of it is to map to physical needs like clothing, housing, food and medicine?
skew-aberration 3 hours ago
parineum an hour ago
whatshisface 4 hours ago
The value of a physical GPU is yet to be determined, and is hard to reverse engineer from these figures.
shoo 2 hours ago
Is it conceivable that Microsoft has some way to use said GPU to generate additional revenue and operating profits?
See the earlier discussion about DeepSeek's revenue: https://news.ycombinator.com/item?id=50163494
madaxe_again an hour ago
When BMW sell you a car, and you buy it on finance (hire-purchase etc.) where they are lending you the money to buy it, they recognise the entire sale value of the car there and then. They even pay tax on the cash they don’t yet have in their pocket.
Meanwhile, you amortise it over years.
For some reason, nobody argues that this isn’t a real sale of a real car.
If it’s all just circular financing, then tax day will be the reveal, as there will simply be no money to pay the corporation tax on the profits.
downrightmike 3 hours ago
Almost, the depreciation is 2 years, but for some reason they wrote it up like 5 for now. But anyone buy nvdia chips is already maxxed out on debt for the next 5 years and the new chips are here shortly. What happens to those 100's of billions in chips?? They get written off. We're already seeing them in cars. There is no shortage except on the scrutiny of the whole securities thing.
foota 5 hours ago
In theory if people are giving all of the money to Nvidia, then it's because they find it valuable (in this case companies purchasing GPUs) so even if the GPUs weren't so expensive in theory there would still be economic value derived from the transactions.
Honali 16 minutes ago
Sure, but willingness to pay isn't quite the same as actually getting a good return
daveguy 4 hours ago
In theory.
undefined 3 hours ago
Honali 21 minutes ago
[dead]
DeluluDon 9 hours ago
[flagged]
lkey 9 hours ago
Nvidia wasn't the thing to bet on in the run up, Samsung, SK, TSMC, 'DRAM' and construction stocks were far more lucrative.
Be sure to still dismiss any legitimate complaints or concerns as envy or fomo though.
undefined 6 hours ago
cyanydeez a day ago
Aka, inflation.
christophilus 9 hours ago
More like a temporary market fluctuation or maybe bubble.
georgemcbay 8 hours ago
> More like a temporary market fluctuation or maybe bubble.
A bubble that is obscuring that most of the economy is pretty weak.
It increasingly looks like everything is getting K-shaped. Not just the income of labor, but the earnings of corporations.
msteffen 8 hours ago
UncleOxidant 6 hours ago
inflation of a bubble.
parineum 7 hours ago
If it was inflation it be all stocks.
JumpCrisscross 5 hours ago
Inflation isn't uniform across an economy.
It also preferentially benefits as a function of margin. If Nvidia's prices double, it logs two thirds of that as earnings. For Kroger it turns into like a penny of extra profit for every dollar of price rises.