Nvidia as a Built-in Soft Hedge Amid Depreciation Concerns

2 months ago

Host

"For those of you that have been around for a while, it comes as no surprise, but full disclosure for, or those of you that are just finding us here at Chip Stock Investor, we view owning Nvidia and a basket of the hyperscaler stocks as a sort of built in soft hedge. When the hyperscalers are spending lots of CapEx, that's great for Nvidia, but at some point that CapEx cycle will come to an end that would be bad for Nvidia, but the related free cash flow for the hyperscalers will go up. So great news for the hyperscalers. And of course you should probably own other companies not related to this whole AI data center CapEx cycle."

The speaker highlights Nvidia's role in benefiting from the current capex cycle of hyperscalers, viewing it as a built-in soft hedge in a diversified portfolio. While Nvidia gains from the increased spending on GPU servers, there is a caution that once the capex cycle ends, it could adversely affect Nvidia's outlook. The commentary underlines the importance of understanding the depreciation schedules and related free cash flow impacts for tech and data center stocks in evaluating investment risks and opportunities.

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