Economist Peter Schiff highlighted parallels between Nvidia Corp.’s (NASDAQ: NVDA) decision to invest $100 billion into OpenAI, the company behind ChatGPT, and the U.S. government’s ever-increasing reliance on foreign debt.
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Throwing ‘Good Money After Bad’
On Thursday, in a post on X, Schiff said, “Nvidia is doing with ChatGPT what the world does with the U.S.,” which is, “they loan us money, so we can buy their goods.”
Schiff is referring to the fiscal model where countries such as Japan and China accumulate U.S. Treasuries in order to finance American consumption of their exports. This is similar to Nvidia’s investment in OpenAI, with the latter expected to splurge on Nvidia’s GPUs to power its massive AI buildout.
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“Since we can’t actually pay them back, they keep lending us more to perpetuate the relationship,” Schiff said, highlighting the unsustainable nature of debt-fueled economic systems that rely on continuous borrowing to maintain the illusion of solvency.
He warns that such financial structures and relationships will be fundamentally unsustainable, since sooner or later, investors will finally decide against “throwing good money after bad.”
Foreign central banks are already reducing their exposure to U.S. Treasuries, and for the first time since 1996, they now hold a larger share of their international reserves in gold than in American government debt.
Nvidia Set To Reap $300 Billion from OpenAI Deal
According to Bank of America Securities analyst Vivek Arya, the OpenAI deal could deliver $300 billion to $500 billion in revenue for Nvidia over the next few years, while calling it a bold financial move, and one that could reinforce the company’s strategic moats.
Like China and Japan regularly do with the U.S., Nvidia’s investments are being termed a masterstroke in demand engineering, with the company cutting similar deals with CoreWeave Inc. (NASDAQ: CRWV) and Lambda Labs earlier this year.
Shares of Nvidia were up 0.41% on Thursday, closing at $177.69, but is down 0.33% overnight. The stock ranks high in Benzinga’s Edge Stock Rankings, with strong scores across the board, and a favorable price trend in the short, medium and long terms. Click here for deeper insights into the stock.
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