NVIDIA Earnings Put the AI Boom to the Test — Woo Warns of “Catastrophe”
Speakers
David Woo
— Founder, David Woo Unbound
Summary
David Woo warns that AI valuations are driven by winner-take-all assumptions and FOMO rather than economic fundamentals, creating catastrophe risk for the S&P 500 because investors are heavily exposed to AI. He points to Google as a likely loser from AI commoditization, Microsoft's depreciation change as earnings-quality risk, and Nvidia's guarantee-driven deals as signs of a hype-fueled capex boom. Woo says he has been short and plans to return to shorting but is currently waiting for the hype to clear.
- David Woo argues AI trade valuations assume a winner-take-all outcome and are driven by FOMO.
- He sees AI as lacking a natural moat, instead facing cannibalization and commoditization.
- Google is singled out as likely to lose from AI commoditization despite strong search.
- Microsoft changed data center depreciation lives from 15 to 25 years, flattering earnings.
- Nvidia's reported OpenAI and SpaceX guarantees are cited as signs of hype-driven capex.
- He warns a break in the AI narrative could be a catastrophe for the S&P 500.
- Reported earnings growth is overstated by Anthropic revaluation gains and tariff rebates.
Ideas
AI valuations are FOMO-driven without moat.
The entire AI trade valuation, including Anthropic's reported $2 trillion target, is based on a winner-take-all assumption and fear of losing out rather than economic logic. Woo sees no natural moat, only cannibalization and commoditization, and warns that a break in the AI narrative would be a catastrophe.
Google loses from AI commoditization.
Google search is still the best search, but even the best search has only a fraction of AI capability. Woo argues Google will ultimately be a big loser from the commoditization of AI because it cannot protect a natural moat and AI will cannibalize search.
AI break would hit S&P 500.
Because almost every investor has large exposure through the S&P 500, a break in the AI narrative or realization that AI valuations rest on winner-take-all FOMO could be a catastrophe for broader U.S. equity markets. Woo says he has been short and plans to return to shorting but is temporarily waiting for the hype to clear.
Microsoft earnings flattered by depreciation change.
Microsoft extended the depreciation life of AI data center projects from 15 years to 25 years, making its depreciation effectively zero last quarter and flattering earnings. Woo calls this an accounting gimmick because data center costs are mostly chips with a much shorter life, meaning the AI capex story is not supported by economic substance.
Nvidia deals signal hype-driven AI capex.
Nvidia's AI dominance may be supported by questionable arrangements: it reportedly wants to give a $125 billion guarantee to OpenAI, and SpaceX/Elon Musk's decision to work exclusively with Nvidia may be tied to a $250 billion guarantee. Woo says the AI capex story 'stinks' and is driven by fear and hype rather than economic return.
