Nvidia Is Turning AI Chips Into a New Wall Street Asset Class

Public.com presents The Rundown, your daily market update in 10 minutes. My name is Zayd Admani and today is Tuesday, August 11th. In today's episode, we'll tell you why the U.S.'s emergency oil stash is now at its lowest level since 1983. We'll also break down NVIDIA's plan to turn AI chips into a brand new asset class with the help of Wall Street. We'll also give you an update on Anthropic's IPO plan, seems like they're just weeks away. Then stick around to the end of the show for an update on SpaceX stock and the insider selling that didn't end up happening last week. We got a great show for you today, let's go. Markets had a quiet start to the week, the S&P 500 fell less than 0.1% after closing at record highs on Friday, while the NASDAQ dropped by 0.3%. So not a lot of action on Monday, the best performing sector was energy and that's because of oil prices. Oil jumped 5% on Monday with Brent crude getting near $90 a barrel again as hopes for a quick deal between the U.S. and Iran are starting to fade again. Remember, just a few days ago, there was a lot of optimism that Iran and Oman were close to reaching an agreement that could reopen the Strait of Hormuz. Well, now both sides are digging in. Iran says they want sanction relief and compensation for war damages before fully reopening the Strait, while President Trump responded by demanding that Iran pay reparations to the U.S. instead. So again, we're at a standstill here and there isn't much tanker traffic through the Strait of Hormuz. I gotta say though, given all the uncertainty here, I'm a bit shocked that oil is still trading under $100 a barrel. One reason for that might be the Strategic Petroleum Reserve, which is the U.S.'s emergency oil stash. The Trump administration has released about 172 million barrels since the war with Iran started back in late February, so that probably helped absorb some of the oil shock. But now, reserves are running low, dropping to under 300 million barrels for the first time since 1983. So with levels running this low, the U.S. might not have the ability to absorb more oil shocks if this conflict isn't resolved soon. So that could mean that oil prices might stay elevated or start rising again if the Strait of Hormuz does not reopen soon. And that's going to have a ripple effect across the economy because higher oil prices means higher inflation, and higher inflation could force the Fed to hike interest rates. And that makes tomorrow's July CPI report even more important because if inflation comes in hot while oil is ripping again, that's not exactly the combination that investors want to see. So we'll see what the report has to say. We'll break down those numbers on tomorrow's episode along with everything else happening in the market. So definitely get subscribed to the podcast if you haven't already, and tune in every day to stay in the loop. Let's run through some headlines, starting with NVIDIA. NVIDIA announced that they are partnering with six firms on Wall Street to raise over $500 billion, and this money will be used to finance the AI buildout. NVIDIA is partnering with some heavy hitters from Wall Street. They signed agreements with Apollo, Blackstone, BlackRock, Brookfield, Goldman Sachs and KKR to create massive pools of capital that NVIDIA's customers can tap to build AI data centers and buy AI chips. Essentially, NVIDIA is bringing in Wall Street to lend money to companies so these companies can keep buying more of NVIDIA's chips. And the interesting part here is how these loans are supposed to work. The plan is to use the GPUs themselves as collateral. Jensen Wang literally called his chips an investable asset class like commercial real estate or toll roads because GPUs are revenue generating. And Wall Street seems to agree with him. BlackRock CEO Larry Fink compared this to the creation of mortgage-backed securities in the 1970s and called it the next phase of financial engineering. Personally, I don't know if I'd be making the mortgage-backed security comparisons if I was trying to make people feel better about this because mortgage-backed securities eventually became a pretty important character in the 2008 financial crisis. Shout out to the big short. Now, obviously, this doesn't mean that AI financing is the next housing crisis, but if we keep seeing headlines like this, I can see investors getting more and more nervous about the AI trade. There is a difference between Google, Meta, Microsoft, and Amazon spending their own cash flow on AI and Wall Street creating an entire new credit market so companies can borrow hundreds of billions of dollars to buy more GPUs. But look, from NVIDIA's perspective, this is obviously great for them because the easier it is for their customers to borrow money and finance their GPUs, the more likely these customers are going to buy more of their GPUs. And NVIDIA may have some skin in the game here too because the company says they could backstop up to 25% of individual loans, which would help borrowers get better financing terms. And I think that's what makes people nervous. I mean, there's already concerns about circular financing and AI with NVIDIA investing or financially supporting companies that then turn around and spend that money on NVIDIA's products. So headlines like this are only going to add to those concerns. Now there is an important caveat here. There is still a ton of unknowns on the details of this $500 billion deal. Apparently, NVIDIA has only signed a memorandum of understanding and not actual contracts and we still don't have information on rates or borrowers or timing. So all of that still needs to be worked out. I'm not going to lie. I feel like NVIDIA is getting pretty risky here. And look, maybe the AI demand keeps exploding and all of this debt is completely justified. But if there is ever a slowdown in demand, we could end up in a situation where there's a lot of NVIDIA hardware that isn't worth as much as Wall Street expected sitting behind a lot of debt. I don't know about you, but that kind of sounds a little 2008-ish, doesn't it? Let's just hope that Michael Lewis doesn't end up writing a book about this. Let me know in the comments on what you guys think. Do headlines like this make you nervous or bearish about the AI trade? Or do you think that all of this is justified? Let's shift gears and talk about Anthropic because we have an update on their IPO plans. According to the Wall Street Journal, Anthropic is targeting September or early October to go public and the company has already started meeting with potential investors ahead of the IPO. Now, there are some more interesting nuggets in this Wall Street Journal piece. Apparently, Anthropic has had to play defense in these meetings because investors are pressing management about three big risks. One is competition from cheaper Chinese AI models. Two is Anthropic's tensions with the Trump administration. And three is the growing backlash against massive AI data centers being built across the country. I think those are all legitimate risks, especially given the fact that Anthropic was last valued at $965 billion. So Anthropic is going to have to say all the right things and show the growth to justify that valuation. Anthropic said back in May that their annualized revenue run rate has topped $47 billion. So I bet Anthropic will end up IPOing at a trillion dollar valuation because there's a ton of investors that want access to one of the Frontier Labs. But you know what, SpaceX's poor post-IPO performance, I wonder if some investors are going to be a bit cautious jumping in, especially because of the risks that I just highlighted earlier. I also feel like there's been a vibe shift recently with OpenAI stealing some of Anthropic's thunder again. Speaking of OpenAI, they don't plan to IPO until sometime next year. Let's talk about some stocks making moves today. Shares of Riot Platforms are ripping higher this morning after the former Bitcoin miner landed a compute deal with a leading Frontier AI company. They wouldn't say who in their press release, but Bloomberg reported that it was Anthropic. Riot got their start by being a Bitcoin miner, but like a lot of crypto miners, they've realized that all the power and data center infrastructure they built for mining Bitcoin can also be used to run AI workloads. And it seems like Anthropic came knocking. According to Bloomberg, Anthropic signed a 20-year deal worth $9.1 billion to use 191 megawatts of capacity at Riot's data center in Rockdale, Texas. So that's a big boost for Riot. On top of that, they also announced earnings that topped estimates. So the AI boom is basically giving these Bitcoin miners a second life. Riot stock is up around 15% this morning at the time of this recording. And if you zoom out, the stock has gone up more than 40% this year. On a side note, has there ever been a better pivot than going from being a Bitcoin miner to an AI cloud provider? It's just funny how that worked out. Now, on the flip side, Rocket Lab stock is dropping this morning after reporting mixed earnings and warning that their next-generation Neutron rocket could be delayed again. The results from the quarter were fine. Rocket Lab reported record quarterly revenues at $234 million, which was slightly ahead of expectations, and their backlog grew to $2.36 billion. But the company still isn't profitable. They lost $0.08 per share, which was worse than what Wall Street expected. And I think the bigger concern is the delay in the Neutron rocket. Neutron is Rocket Lab's much bigger reusable rocket that's supposed to compete more directly with SpaceX's Falcon 9. Rocket Lab had been targeting its first launch of the Neutron rocket to be before the end of this year, but now management warned that that launch could slip into 2027. So that delay is not what investors wanted to hear, and shares of Rocket Lab are down around 4% this morning at the time of this recording. And if you zoom out, Rocket Lab has had a disappointing year. The stock is basically flat for the year and down more than 40% from its peak back in May. Let's wrap the show with a fun fact. SpaceX is back above their IPO price after nearly a month. In fact, SpaceX stock has gone up over 25% since its lows from the middle of last week. What's crazy is that last week, everyone was expecting SpaceX to experience a huge wave of selling on Thursday because that was when the first major lock-up period expired, which meant that 911 million shares owned by employees and insiders were allowed to be sold for the first time. But the big insider sell-off never ended up happening, and that caught short sellers off guard. These short sellers had to buy SpaceX stock to cover their short position, which caused SpaceX stock to jump 16% on Friday, and the stock jumped another 4% on Monday. So yeah, it just goes to show you that if everyone thinks that one thing is going to happen, sometimes the opposite thing happens. Now, just an FYI, the next batch of unlock of SpaceX stock will happen on August 20th, so we'll see what happens then. But for now, SpaceX investors are breathing a sigh of relief, and shout out to everyone that bought the SpaceX dip last week. If you were one of those people that bought the dip, let me know in the comments if you're planning to hold the stock for the long term or flip it for a quick profit.