Investment Concerns: The podcast discusses potential accounting gimmicks in AI companies like Nvidia, drawing parallels to past corporate scandals like Enron.
Round Tripping: Nvidia's $100 billion investment in OpenAI is scrutinized as a possible round-tripping scheme, where funds are cycled back to inflate revenue and share prices.
Government Involvement: The podcast criticizes the close relationship between AI companies and government, labeling it as corporatism or crony capitalism, which could lead to monopolistic practices.
Market Valuation: The inflated valuations of AI companies are questioned, with concerns that AI, being a commodity, might not sustain high profit margins in the long term.
Economic Implications: The podcast highlights the potential negative impact of government and corporate collusion on free market competition, particularly affecting startups.
Industry Dynamics: Nvidia's investments in companies like Intel and OpenAI are seen as strategic moves to maintain market dominance, potentially stifling competition.
Free Market Advocacy: Emphasis is placed on distinguishing between crony capitalism and true free market capitalism, advocating for less government interference in business.
Transcript
Hello fellow Rebel Capitals. Hope you're well. So, we have to talk about the accounting gimmicks that are going on right now with some of these huge AI companies, Nvidia, and others. Now, I'm not a bottoms up type of guy. I don't really get into the micro analysis of the balance sheets. I'm over a macro guy. You guys know that. But some of this stuff really doesn't pass the sniff test. And when you get down into the nitty-gritty, you got to ask yourself, are they doing exactly what Enron was doing? Let me show you exactly what I'm referring to. Let's do a screen share and we're going to get into not only the weird accounting stuff. I think they call it round tripping, but also how they're really in bed with the government. And look, you can have your opinion on Trump or Biden or whomever, but at the end of the day, I think all of us would agree that we would prefer to have the private sector, part of the private sector and the public sector, the government, a part of the government. We we don't really want them comingling. There there's a word for that. And it it's not a good word. We we'll we'll politely call it corporatism or crony capitalism. But anyway, let's get into exactly what's going on here. So, first we're going to go over to CNBC and let's see. Do we have the screen share working? Yeah, we do. Okay, cool. So, Altman Hang, that's how you spell Jensen's or say Jensen's last name. uh in the last minute negotiations that sealed the $100 billion open AI Nvidia deal. So I don't know if you guys have heard about this but Nvidia has agreed and this just came out today to invest billion hundred billion dollar in open AI. Now, like I said, I'm not an expert on this stuff with the nitty-gritty analysis of the company's balance sheets and, you know, like short sellers do. I don't get into that. I'm just kind of a macro guy and I like to use some common sense. But just using common sense, I'm like, well, wait a minute here. Isn't Open AI buying the GPUs from Nvidia or their product? So, isn't this like Nvidia giving them a hundred billion dollars that Open AAI is going to just give right back to them? And how but during this roundtrip process, what happens? Like if these weren't publicly traded companies or if this was just like let's say Altman, Sam Alman owned a 7-Eleven or something and Jensen owned a a dry cleaner. It really wouldn't matter because you're not really increasing the valuation to a degree that that will move the needle. Like who cares, right? You're not selling your company. You don't have sharers out there. But it's way different when you're dealing with these publicly traded company or the private companies that haven't yet gone public where they're looking at their val valuations and they're actually selling you know shares on the uh on the private markets. So what happens there? Okay. Well what let's just assume for a and I realize that all the hundred billion probably won't go back to Nvidia but let's just say that it does. Well, all of a sudden, Nvidia can book that as revenue, hundred billion worth of revenue. And you say, "Well, so what?" Because it's just going right back to them. But no, you got to think about what that does to their share price because their share price is going to be a multiple of revenue. So, let's just all being equal, let's assume they get 100 billion back in. Well, their share price is going to go up by more than 100 billion. It's going to go up by, you know, whatever. Let's just say 500 billion. So now all of a sudden Jensen just pocketed 400 billion for for what? Okay. So he got some sales. Now you could argue that Alman would have bought those GPUs from him anyway. Okay. Maybe. But they would have used someone else's money. So you see how this really gets convoluted and incestuous to say the least. So but but that's not all that's going on here. Let's keep going. Key talking points. Nvidia's hundred billion dollar deal, the company behind Chat GPT, followed one- on-one negotiations between the CEOs. So, we're going to get down into the nitty-gritty of these one-on-one negotiations, which in and of itself is a headscratcher. Let's keep going. terms were finalized during President Trump's UK trip. This is where it gets even more weird and we get even more involvement, let's say, from the government, which why like like why is this all of a sudden like why is this a thing? Why why is the government getting involved in this transaction at all? Like what? Last talking point. Even with Nvidia's massive investment, OpenAI plans on debt and may build and operate its own cloud services. Okay, so even with this hundred billion dollar commitment, they still have to go out and raise more money. Why? Because they don't make money. They they look at the end of the day AI itself is not a good business. And you say, George, how can you say that? It's the future of the world. No, I totally agree. I totally agree. But it's a commodity. It it doesn't really have a network effect like let's just say Facebook or Instagram or Twitter or something like that. It it's just it's a commodity and what's going to happen is you're just going to have like any other commodity, you're just going to have a price war and it's going to be a race to the bottom to the point where most likely in the future the the AI that we use now, even the premium model, that's all going to be free. this is going to be a free service. So, I guess maybe they could monetize it with advertising and whatnot, but you're you're you're even then it's to a certain degree it's a race to the bottom and it's not as much of a commodity as even or excuse me it's even more of a commodity than something like Google that you just kind of get used to using it all the time. So, it's just the user interface. And I I mean, it's it's just very difficult to argue how this is going to be a massive massive massive profit driver in the future, assuming that it continues in its existing form, but just gets better, which I'm sure it will. And again, I'm not saying that it's not the future, and I'm not saying that it's not going to make people more productive. It's made me much more productive. But that doesn't necessarily mean that it's a huge huge money maker or a money maker that would warrant this type of valuation. So how do they get the valuation? Well, one of the reasons is because Nvidia comes in and says, "Hey, we're going to invest 100 billion at what valuation?" Um, let's see here. maybe I don't know a trillion dollars. Well, where'd you get that? I don't know. It just sounds good. And it's double what the valuation is right now. And so then Jensen invests at a 100red bill. And I'm not saying it's it's a trillion or whatever, but he whatever it is, he invests at a much higher number. So then Altman can go out and sell equity to other people at that way higher valuation and then take that money and give it to Nvidia which in turns gives it back to Sam. It's like what? And then Nvidia of course like I said they're booking that as earnings which increases their share value at a multiple. And it's like wait a minute here. I I get it that AI is actually receiving a product from Nvidia, but what would Nvidia's sales be? I think this is a better question. What would Nvidia's sales be right now if they weren't if if they had no sales from companies that they've actually given money to? Like obviously they'd still be profitable, but would the company be val worth $4 trillion and probably not. So with this round tripping and they're not just doing it with open AAI like they're doing I think they're coreweave is another company they're doing it with and who knows what else is going on underneath the surface here but let's just assume that's added $2 trillion to their valuation because they've booked this revenue that's basically you know someone responded to me on Twitter and he gave a great analogy he's like basically what's happening is your kid is living in your basement and what you're doing is you're giving your kid an allowance of $200 a month and then you're charging them $200 a month for rent. And then what you're doing is you're saying that you're renting out your basement for $2,400 a month. And then what you're doing is you're charging someone based on a multiple of that $2,400 a month. So then you're selling, let's say, the rights to that rent in the basement for $100,000. And that's what's going And that's exactly what's going on here. I mean, exactly. So, let's keep going. And here's another thing that I I really want to highlight this as well, which is very I I just get a really bad vibe. And again, you could think that Donald Trump is the greatest thing since sliced bread, but I don't think anyone on this live stream, if I asked them, hey, do you want more government involvement in the private sector? Do you want more government or this interplay between the two? So, they're basically one and the same. Like, I don't think anyone would want that because again, that that's I hate to use the F-word. Uh you guys know the F-word I'm talking about. Um not the four-letter word. uh the one that Mussolini used, you know, I I hate to use that especially in today's day and age because that that term is so misused and it's used to depict Trump as obviously something he's not from on a social level. But if you just look at at Mousolini's definition of that word, it's really the merger of the corporation and the state. And so I don't think anyone that really values free market capitalism would say, "Oh yeah, I want a merger of state and corporation." That's a good idea. Regardless if even if it's your guy doing it. Because what we have to understand is even if it's your guy doing it now and you like what he's doing it, in three years he's going to be gone. And now all of a sudden who do you have? And they're going to be doing the exact same thing. And it's probably going to be even worse. So anyway, this is a very slippery slope, but listen to this. It helped that Jensen and Sam had been a part of President Donald Trump's state visit to the UK a week earlier. Oh, okay. Why? Like why why is Donald Trump taking tech CEOs with him? Like like I don't like the the the rubbing elbows with the politicians. It's I I just don't think this leads to good things happening. It's just it it's this is pure straight cronyism and it's just, you know, it's it's buying political favors and it's just getting in good with the people that are in power just so they can help you build a moat around your company which will reduce competition and therefore be a net uh negative for society at large. I mean, another thing before I move on that I'll mention quickly is just the the visas. I forgot it was the H18. You guys know what I'm talking about. How Trump put uh $100,000 price on these specific visas. And first of all, what we have to realize is there's a limited amount of those that they give every single year. And so the the supply isn't going to meet demand first and foremost. And even at 100,000, you're still going to have the exact same amount of visas issued. But you got to think, who does that actually hurt? Because if Google or Facebook or Apple or Nvidia or OpenAI or whatever, if they want an engineer from India, let's say, you think they can afford the 100,000? Uh yeah, that's like that's nothing to them. That is absolutely nothing that they don't even recognize that. So, that's not going to deter the big guys from hiring whoever the hell they want. But who is that going to deter? That's going to deter the startups and the startups that could be competing with the big guys in the future. And this is, I think, another reason why you got Jensen and Sam saying, "Oh, oh, hey, Donald, you're going to UK? Yeah, let's uh let's join you. In fact, um I don't know. Why don't we take our jet and why don't we do this and why don't we do that?" Yeah, great. And you know what would be a great political ploy for you going into midterms is why don't you set up this $100,000 fee for these visas and then you can present that to your voting public as though you're standing up for the American worker even though there's still going to be the exact same amount of foreign workers hired because it's it's it's we've got a cap on it. That cap is going to be met. So you still bringing in the same amount of workers. It doesn't matter. But then what that does, you know, it just kind of allows us to go ahead and hire whoever we want and to cherrypick the top talent. And our competition, the startups can't do that because they can't afford to. So it's it's again it's just this you've got this incestuousness with the companies themselves but also with the the government and political power and and they're just like they always do these big corporations. They're just leveraging big government in order to create a moat around their business and effectively a monopoly. That is the and that's why I always say free market capitalism. You'll notice I never say capitalism. I never say capitalism is a good thing. I always say free market capitalism because free market capitalism, businesses go bust, banks go bust. You don't have bailouts. And in free market capitalism, you remove the government from the equation and therefore these big corporations aren't able to build that moat around their business leveraging political power and the the the regulations of the government. And therefore, you get all of these more nimble companies that are able to compete with them, which reduces prices and improves the product or the service for the average Joe and Jane. Okay, here we go. As capital and influence are increasing, concentrated in the hands of two companies closest to the heart of artificial intelligence. I mean, remember I remember listening to this interview with Mark Andrezen and uh Joe Rogan where Andrezen was just horrified. I think this was before the election was just horrified that the Biden administration came to him and said, "Listen, we need to control artificial intelligence." Like like we need to be the entity calling the shots here. And uh Mark Andre was just like uh what? No, no, no. This is not the America that I signed up for. And but it it but we're moving in that direction where now all of a sudden you've got the two companies that are basically at the heart. They're the ones that are controlling AI and they're the ones that are kissing the ring of Donald Trump and he's the one that's granting them the ability to do X, Y, or Z. I mean, it it's almost the same thing. It's just with a different guy. OpenAI's ascent to the forefront of generative AI has relied on Nvidia's high-powered graphic GPUs. Now, the companies are more intimately linked than ever. Yeah. uh to the point where they're almost the same balance sheet as they plan to carve a path jointly build the next wave of AI supercomputing facilities. Now before we move on with this article which is really fascinating. I want to go over to chat GPT because I just wanted okay give me the definition of roundtpping and I think I asked I I asked basically is it legal? So what is revenue roundtpping by public companies and is it legal? So here's the answer. What is revenue roundtpping? Revenue roundtpping sometime called channel stuffing circular trading is an accounting trick. I would call it a gimmick financial engineering where a company sells goods or services to another company and then simultaneously buys back nearly the same goods or services or investments. Same exact thing here. The transactions inflate reported revenue because each leg of the trade gets reported as a sale even though no real economic value was created. Essentially, money or contracts goes in a circle and the company can show higher topline sales without actually improving profits or cash flow. And again, in the term of open AI, in terms of OpenAI, they can sit there and say, "Hey, Jensen just gave us a hundred billion at a trillion dollar valuation. And so that sets the high water mark. So then they go out to investors, they sell equity at that trillion dollar level as opposed to before the billion dollar investment, maybe they only could have sold equity at a $500 uh billion dollar valuation. And those aren't exact numbers. I'm just using them for the sake of the example. So why companies do it? Why do you think? So they can make more money without having to produce any more stuff. Jeez. And you know, another thing that I I wrote down here that I wanted to mention, it it's like the the junior gold miners, you know, were notorious for doing this. I don't know if you want to call it a pump and dump. It's just financial engineering. It it's it's, you know, you buy my stock, I'll buy your stock, and then we'll just dump it on the public or whatever. But then the crypto guys, I think, saw what the junior gold miners were doing, and they're like, "Wow, that's a great idea." And what we can do is we can take this to a whole new level with the use of technology. And so the crypto guys did the same thing but just on steroids. And then I think the tech guys like Sam Alman and and Jensen and you know uh whoever else they looked at what the crypto guys are doing and they're like wait a minute here. What on earth are we doing trying to produce goods and services and sell more stuff to make money? That's for stupid guys, you know, that's that's old school thinking. That's antiquated. We don't want to do that. That's for those poor poor saps out there that are wanting to work hard. What we should do is just take a book or a page right out of the playbook for the crypto scammers and we'll just take this revenue roundt tripping and just take the same hundred billion dollars and just it goes to you you you you you and every single time it makes a full rotation. everyone's share price goes up because the general public has all this FOMO and they're like AI AI oh we can't get enough we can't get enough and it's just lining the pockets of the the few guys that are in the know I mean it's let's keep going here so what they've done basically is they've taken the junior gold miner playbook of like the 1980s and the 1990s the the crypto scammers took took that and just added all this tech to it and just like supercharged it. And then the tech guys now are taking that same playbook and just doing pretty much the exact same thing or similar version, but they're instead of doing it with just hundreds of millions of dollars like those like those pleb crypto scammers, they're doing it with trillions of dollars. and they're isolating themselves and then doing it right under the nose of the government and in in tandem with the government. Wait until we get into Intel. We're going to dive into that here with the CNBC article, but let's get into this here. Is it legal? Not if it lacks economic substance. So, it is true they're selling the GPUs or they they say they're going to sell them. Will they? I don't know. But look at enforcement history. Enron used roundtpping with energy contracts to inflate revenues in the early 2000s. Uh, okay. That doesn't in doesn't put you in great company there. Global Crossing did it with telecom capacity swaps, booking billions in fake sales. Let's go back to the CNBC article. Sam and Jensen negotiated their pact largely through a mix of virtual discussions and one-on-one meetings in London, San Francisco, and Washington DC. No bankers involved. Wow. They make it seem like it's this handshake deal between these guys with just extremely high levels of integrity and just very um uh you know, people of character that you can trust. We don't we don't need these bankers involved. We don't need contracts. No, no, no, no, no, no, no. We're straight shooters. We can just do a handshake deal on this one. That just shows you how good of a guy Jensen is and how good of a guy Altman is. Or or or is it that no bankers were willing to be involved because they can see right through this nonsense? I would heir on on the latter like they're making it seem as though they're doing this as though they're virtuous individuals when in reality I think it's they did they couldn't take it to the bankers because there's no banker that would be involved with it because they didn't want to attach themselves to what was obviously uh a round trip very similar to Enron. The arrangement calls for Nvidia to best invest 10 billion at a time. As the buildout unfolds, Nvidia will also supply cutting edge processors powering a host of new data centers. Wow. The just it just it works so well. It's just so coincidental that Nvidia just found a great investment in Open AI and OpenAI just coincidentally is going to buy all their GPUs from Nvidia. Wow, who would have thought? I mean, come on. Come on. The pact also comes with comes less than two weeks after disclosure from Oracle indicate that OpenAI agreed to spend 300 billion in computing power with the company over five years. Wow. Isn't that coincidental that Oracle just happens to be the customer of OpenAI and OpenAI is doing almost the exact same thing Nvidia is doing with OpenAI. Oh, but wait, there's more. At the start of the year, OpenAI joined Stargate, a multi-billion dollar project announced by President Trump. There you go. The government's involved once again. And backed by Oracle and Soft Bank. Oh, okay. So, let me get this straight. Open AAI is spending or committing to spend $300 billion with Oracle, which drives their share price through the roof. And then what Oracle is doing is taking that $300 billion and investing it right back into this project that OpenAI just happens to be a part of to build out the next generation of AI infrastructure. And if they're building out the next generation of AI infrastructure, where do you think that a large portion of that 300 billion is going to go? Oh, that would be Nvidia. I mean, this is come on. How are And I know a lot of people are calling this out as they rightfully should. And this is this really wasn't on my radar. We talked about this briefly in St. Barts, but you again, I'm just such a macro guy. That's really what interests me that I usually don't get into these interactions between the individual companies and what and whatnot. But now this is totally on my radar and I can see why people are up in arms about this. And then here you go. Open AI uh Sam Alman Jensen Wang Wang whatever arrived to attend the state banquet during US president's Donald Trump's state visit to Windsor Castle. They're in here in the tuxedos with all the politicians and Trump and like why like why you're the CEO of a company like focus on making GPUs like Sam like like focus on chat GPT not hallucinating like you got plenty of stuff to do like like but you see what's happening is this is their priority because their priority isn't creating a business their priority isn't sales Their priority isn't driving technology. Their priority is getting in good with the government, right? It's it's the political favors. It goes right back to what Ein Rand was talking about. Pretty much the premise of Atlas Shrugged. Last week, Nvidia put five billion into Intel as a joint venture co-developed data center PC chips with troubled chipmaker. Nvidia also said it invested close to 700 million in UK. Okay. Blah blah blah. So they're investing in uh Intel. And by the way, who else invested in Intel? Oh, that's right. The government. The government bought 10% of Intel. And then, wouldn't you know it, the very next week, Jensen puts in 5 billion or commits to it. Why do you think he did that? Oh, I I'm sure it has nothing to do with buying political favors from the government that will do whatever he needs to create a moat around his business like the visas so the startups can't compete with him in the future. I mean, this is straight collusion with private enterprise, big government and big corporations to create monopolies. And there you go. That's unfortunately the world we live in. We've gone from just milliondoll kind of gold, junior gold miner scammers to hundred million dollar crypto scammers to trillion dollar tech scammers and political scammers. And they're all using the exact same playbook, but they're just at each stage they're just leveling up. and and that's what is being passed off as capitalism and it's just nonsense. We have to put our foot down and make sure that we're defining terms properly. And so for all the lefties out there that point to this and say, "Well, that's the problem with capitalism." No, it's not. Uh that that is the problem with the economic f-word. And you guys know exactly what I'm talking about is defined by Mussolini. That's the problem with corporatism. That's the problem with crony capitalism. What we're seeing right here is the opposite of free market capitalism. So, when we're standing up for capitalism, like I said earlier, we have to make sure that we're defining our terms and that we're not just standing up for capitalism, but we're standing up for free market capitalism. All right, guys. Enjoy the rest of your evening. As always, make sure you're standing up for freedom, liberty, free market, capitalism. We'll see you in the next video.
Here's The Dark Secret That Could CRUSH AI Stocks
Summary
Transcript
Hello fellow Rebel Capitals. Hope you're well. So, we have to talk about the accounting gimmicks that are going on right now with some of these huge AI companies, Nvidia, and others. Now, I'm not a bottoms up type of guy. I don't really get into the micro analysis of the balance sheets. I'm over a macro guy. You guys know that. But some of this stuff really doesn't pass the sniff test. And when you get down into the nitty-gritty, you got to ask yourself, are they doing exactly what Enron was doing? Let me show you exactly what I'm referring to. Let's do a screen share and we're going to get into not only the weird accounting stuff. I think they call it round tripping, but also how they're really in bed with the government. And look, you can have your opinion on Trump or Biden or whomever, but at the end of the day, I think all of us would agree that we would prefer to have the private sector, part of the private sector and the public sector, the government, a part of the government. We we don't really want them comingling. There there's a word for that. And it it's not a good word. We we'll we'll politely call it corporatism or crony capitalism. But anyway, let's get into exactly what's going on here. So, first we're going to go over to CNBC and let's see. Do we have the screen share working? Yeah, we do. Okay, cool. So, Altman Hang, that's how you spell Jensen's or say Jensen's last name. uh in the last minute negotiations that sealed the $100 billion open AI Nvidia deal. So I don't know if you guys have heard about this but Nvidia has agreed and this just came out today to invest billion hundred billion dollar in open AI. Now, like I said, I'm not an expert on this stuff with the nitty-gritty analysis of the company's balance sheets and, you know, like short sellers do. I don't get into that. I'm just kind of a macro guy and I like to use some common sense. But just using common sense, I'm like, well, wait a minute here. Isn't Open AI buying the GPUs from Nvidia or their product? So, isn't this like Nvidia giving them a hundred billion dollars that Open AAI is going to just give right back to them? And how but during this roundtrip process, what happens? Like if these weren't publicly traded companies or if this was just like let's say Altman, Sam Alman owned a 7-Eleven or something and Jensen owned a a dry cleaner. It really wouldn't matter because you're not really increasing the valuation to a degree that that will move the needle. Like who cares, right? You're not selling your company. You don't have sharers out there. But it's way different when you're dealing with these publicly traded company or the private companies that haven't yet gone public where they're looking at their val valuations and they're actually selling you know shares on the uh on the private markets. So what happens there? Okay. Well what let's just assume for a and I realize that all the hundred billion probably won't go back to Nvidia but let's just say that it does. Well, all of a sudden, Nvidia can book that as revenue, hundred billion worth of revenue. And you say, "Well, so what?" Because it's just going right back to them. But no, you got to think about what that does to their share price because their share price is going to be a multiple of revenue. So, let's just all being equal, let's assume they get 100 billion back in. Well, their share price is going to go up by more than 100 billion. It's going to go up by, you know, whatever. Let's just say 500 billion. So now all of a sudden Jensen just pocketed 400 billion for for what? Okay. So he got some sales. Now you could argue that Alman would have bought those GPUs from him anyway. Okay. Maybe. But they would have used someone else's money. So you see how this really gets convoluted and incestuous to say the least. So but but that's not all that's going on here. Let's keep going. Key talking points. Nvidia's hundred billion dollar deal, the company behind Chat GPT, followed one- on-one negotiations between the CEOs. So, we're going to get down into the nitty-gritty of these one-on-one negotiations, which in and of itself is a headscratcher. Let's keep going. terms were finalized during President Trump's UK trip. This is where it gets even more weird and we get even more involvement, let's say, from the government, which why like like why is this all of a sudden like why is this a thing? Why why is the government getting involved in this transaction at all? Like what? Last talking point. Even with Nvidia's massive investment, OpenAI plans on debt and may build and operate its own cloud services. Okay, so even with this hundred billion dollar commitment, they still have to go out and raise more money. Why? Because they don't make money. They they look at the end of the day AI itself is not a good business. And you say, George, how can you say that? It's the future of the world. No, I totally agree. I totally agree. But it's a commodity. It it doesn't really have a network effect like let's just say Facebook or Instagram or Twitter or something like that. It it's just it's a commodity and what's going to happen is you're just going to have like any other commodity, you're just going to have a price war and it's going to be a race to the bottom to the point where most likely in the future the the AI that we use now, even the premium model, that's all going to be free. this is going to be a free service. So, I guess maybe they could monetize it with advertising and whatnot, but you're you're you're even then it's to a certain degree it's a race to the bottom and it's not as much of a commodity as even or excuse me it's even more of a commodity than something like Google that you just kind of get used to using it all the time. So, it's just the user interface. And I I mean, it's it's just very difficult to argue how this is going to be a massive massive massive profit driver in the future, assuming that it continues in its existing form, but just gets better, which I'm sure it will. And again, I'm not saying that it's not the future, and I'm not saying that it's not going to make people more productive. It's made me much more productive. But that doesn't necessarily mean that it's a huge huge money maker or a money maker that would warrant this type of valuation. So how do they get the valuation? Well, one of the reasons is because Nvidia comes in and says, "Hey, we're going to invest 100 billion at what valuation?" Um, let's see here. maybe I don't know a trillion dollars. Well, where'd you get that? I don't know. It just sounds good. And it's double what the valuation is right now. And so then Jensen invests at a 100red bill. And I'm not saying it's it's a trillion or whatever, but he whatever it is, he invests at a much higher number. So then Altman can go out and sell equity to other people at that way higher valuation and then take that money and give it to Nvidia which in turns gives it back to Sam. It's like what? And then Nvidia of course like I said they're booking that as earnings which increases their share value at a multiple. And it's like wait a minute here. I I get it that AI is actually receiving a product from Nvidia, but what would Nvidia's sales be? I think this is a better question. What would Nvidia's sales be right now if they weren't if if they had no sales from companies that they've actually given money to? Like obviously they'd still be profitable, but would the company be val worth $4 trillion and probably not. So with this round tripping and they're not just doing it with open AAI like they're doing I think they're coreweave is another company they're doing it with and who knows what else is going on underneath the surface here but let's just assume that's added $2 trillion to their valuation because they've booked this revenue that's basically you know someone responded to me on Twitter and he gave a great analogy he's like basically what's happening is your kid is living in your basement and what you're doing is you're giving your kid an allowance of $200 a month and then you're charging them $200 a month for rent. And then what you're doing is you're saying that you're renting out your basement for $2,400 a month. And then what you're doing is you're charging someone based on a multiple of that $2,400 a month. So then you're selling, let's say, the rights to that rent in the basement for $100,000. And that's what's going And that's exactly what's going on here. I mean, exactly. So, let's keep going. And here's another thing that I I really want to highlight this as well, which is very I I just get a really bad vibe. And again, you could think that Donald Trump is the greatest thing since sliced bread, but I don't think anyone on this live stream, if I asked them, hey, do you want more government involvement in the private sector? Do you want more government or this interplay between the two? So, they're basically one and the same. Like, I don't think anyone would want that because again, that that's I hate to use the F-word. Uh you guys know the F-word I'm talking about. Um not the four-letter word. uh the one that Mussolini used, you know, I I hate to use that especially in today's day and age because that that term is so misused and it's used to depict Trump as obviously something he's not from on a social level. But if you just look at at Mousolini's definition of that word, it's really the merger of the corporation and the state. And so I don't think anyone that really values free market capitalism would say, "Oh yeah, I want a merger of state and corporation." That's a good idea. Regardless if even if it's your guy doing it. Because what we have to understand is even if it's your guy doing it now and you like what he's doing it, in three years he's going to be gone. And now all of a sudden who do you have? And they're going to be doing the exact same thing. And it's probably going to be even worse. So anyway, this is a very slippery slope, but listen to this. It helped that Jensen and Sam had been a part of President Donald Trump's state visit to the UK a week earlier. Oh, okay. Why? Like why why is Donald Trump taking tech CEOs with him? Like like I don't like the the the rubbing elbows with the politicians. It's I I just don't think this leads to good things happening. It's just it it's this is pure straight cronyism and it's just, you know, it's it's buying political favors and it's just getting in good with the people that are in power just so they can help you build a moat around your company which will reduce competition and therefore be a net uh negative for society at large. I mean, another thing before I move on that I'll mention quickly is just the the visas. I forgot it was the H18. You guys know what I'm talking about. How Trump put uh $100,000 price on these specific visas. And first of all, what we have to realize is there's a limited amount of those that they give every single year. And so the the supply isn't going to meet demand first and foremost. And even at 100,000, you're still going to have the exact same amount of visas issued. But you got to think, who does that actually hurt? Because if Google or Facebook or Apple or Nvidia or OpenAI or whatever, if they want an engineer from India, let's say, you think they can afford the 100,000? Uh yeah, that's like that's nothing to them. That is absolutely nothing that they don't even recognize that. So, that's not going to deter the big guys from hiring whoever the hell they want. But who is that going to deter? That's going to deter the startups and the startups that could be competing with the big guys in the future. And this is, I think, another reason why you got Jensen and Sam saying, "Oh, oh, hey, Donald, you're going to UK? Yeah, let's uh let's join you. In fact, um I don't know. Why don't we take our jet and why don't we do this and why don't we do that?" Yeah, great. And you know what would be a great political ploy for you going into midterms is why don't you set up this $100,000 fee for these visas and then you can present that to your voting public as though you're standing up for the American worker even though there's still going to be the exact same amount of foreign workers hired because it's it's it's we've got a cap on it. That cap is going to be met. So you still bringing in the same amount of workers. It doesn't matter. But then what that does, you know, it just kind of allows us to go ahead and hire whoever we want and to cherrypick the top talent. And our competition, the startups can't do that because they can't afford to. So it's it's again it's just this you've got this incestuousness with the companies themselves but also with the the government and political power and and they're just like they always do these big corporations. They're just leveraging big government in order to create a moat around their business and effectively a monopoly. That is the and that's why I always say free market capitalism. You'll notice I never say capitalism. I never say capitalism is a good thing. I always say free market capitalism because free market capitalism, businesses go bust, banks go bust. You don't have bailouts. And in free market capitalism, you remove the government from the equation and therefore these big corporations aren't able to build that moat around their business leveraging political power and the the the regulations of the government. And therefore, you get all of these more nimble companies that are able to compete with them, which reduces prices and improves the product or the service for the average Joe and Jane. Okay, here we go. As capital and influence are increasing, concentrated in the hands of two companies closest to the heart of artificial intelligence. I mean, remember I remember listening to this interview with Mark Andrezen and uh Joe Rogan where Andrezen was just horrified. I think this was before the election was just horrified that the Biden administration came to him and said, "Listen, we need to control artificial intelligence." Like like we need to be the entity calling the shots here. And uh Mark Andre was just like uh what? No, no, no. This is not the America that I signed up for. And but it it but we're moving in that direction where now all of a sudden you've got the two companies that are basically at the heart. They're the ones that are controlling AI and they're the ones that are kissing the ring of Donald Trump and he's the one that's granting them the ability to do X, Y, or Z. I mean, it it's almost the same thing. It's just with a different guy. OpenAI's ascent to the forefront of generative AI has relied on Nvidia's high-powered graphic GPUs. Now, the companies are more intimately linked than ever. Yeah. uh to the point where they're almost the same balance sheet as they plan to carve a path jointly build the next wave of AI supercomputing facilities. Now before we move on with this article which is really fascinating. I want to go over to chat GPT because I just wanted okay give me the definition of roundtpping and I think I asked I I asked basically is it legal? So what is revenue roundtpping by public companies and is it legal? So here's the answer. What is revenue roundtpping? Revenue roundtpping sometime called channel stuffing circular trading is an accounting trick. I would call it a gimmick financial engineering where a company sells goods or services to another company and then simultaneously buys back nearly the same goods or services or investments. Same exact thing here. The transactions inflate reported revenue because each leg of the trade gets reported as a sale even though no real economic value was created. Essentially, money or contracts goes in a circle and the company can show higher topline sales without actually improving profits or cash flow. And again, in the term of open AI, in terms of OpenAI, they can sit there and say, "Hey, Jensen just gave us a hundred billion at a trillion dollar valuation. And so that sets the high water mark. So then they go out to investors, they sell equity at that trillion dollar level as opposed to before the billion dollar investment, maybe they only could have sold equity at a $500 uh billion dollar valuation. And those aren't exact numbers. I'm just using them for the sake of the example. So why companies do it? Why do you think? So they can make more money without having to produce any more stuff. Jeez. And you know, another thing that I I wrote down here that I wanted to mention, it it's like the the junior gold miners, you know, were notorious for doing this. I don't know if you want to call it a pump and dump. It's just financial engineering. It it's it's, you know, you buy my stock, I'll buy your stock, and then we'll just dump it on the public or whatever. But then the crypto guys, I think, saw what the junior gold miners were doing, and they're like, "Wow, that's a great idea." And what we can do is we can take this to a whole new level with the use of technology. And so the crypto guys did the same thing but just on steroids. And then I think the tech guys like Sam Alman and and Jensen and you know uh whoever else they looked at what the crypto guys are doing and they're like wait a minute here. What on earth are we doing trying to produce goods and services and sell more stuff to make money? That's for stupid guys, you know, that's that's old school thinking. That's antiquated. We don't want to do that. That's for those poor poor saps out there that are wanting to work hard. What we should do is just take a book or a page right out of the playbook for the crypto scammers and we'll just take this revenue roundt tripping and just take the same hundred billion dollars and just it goes to you you you you you and every single time it makes a full rotation. everyone's share price goes up because the general public has all this FOMO and they're like AI AI oh we can't get enough we can't get enough and it's just lining the pockets of the the few guys that are in the know I mean it's let's keep going here so what they've done basically is they've taken the junior gold miner playbook of like the 1980s and the 1990s the the crypto scammers took took that and just added all this tech to it and just like supercharged it. And then the tech guys now are taking that same playbook and just doing pretty much the exact same thing or similar version, but they're instead of doing it with just hundreds of millions of dollars like those like those pleb crypto scammers, they're doing it with trillions of dollars. and they're isolating themselves and then doing it right under the nose of the government and in in tandem with the government. Wait until we get into Intel. We're going to dive into that here with the CNBC article, but let's get into this here. Is it legal? Not if it lacks economic substance. So, it is true they're selling the GPUs or they they say they're going to sell them. Will they? I don't know. But look at enforcement history. Enron used roundtpping with energy contracts to inflate revenues in the early 2000s. Uh, okay. That doesn't in doesn't put you in great company there. Global Crossing did it with telecom capacity swaps, booking billions in fake sales. Let's go back to the CNBC article. Sam and Jensen negotiated their pact largely through a mix of virtual discussions and one-on-one meetings in London, San Francisco, and Washington DC. No bankers involved. Wow. They make it seem like it's this handshake deal between these guys with just extremely high levels of integrity and just very um uh you know, people of character that you can trust. We don't we don't need these bankers involved. We don't need contracts. No, no, no, no, no, no, no. We're straight shooters. We can just do a handshake deal on this one. That just shows you how good of a guy Jensen is and how good of a guy Altman is. Or or or is it that no bankers were willing to be involved because they can see right through this nonsense? I would heir on on the latter like they're making it seem as though they're doing this as though they're virtuous individuals when in reality I think it's they did they couldn't take it to the bankers because there's no banker that would be involved with it because they didn't want to attach themselves to what was obviously uh a round trip very similar to Enron. The arrangement calls for Nvidia to best invest 10 billion at a time. As the buildout unfolds, Nvidia will also supply cutting edge processors powering a host of new data centers. Wow. The just it just it works so well. It's just so coincidental that Nvidia just found a great investment in Open AI and OpenAI just coincidentally is going to buy all their GPUs from Nvidia. Wow, who would have thought? I mean, come on. Come on. The pact also comes with comes less than two weeks after disclosure from Oracle indicate that OpenAI agreed to spend 300 billion in computing power with the company over five years. Wow. Isn't that coincidental that Oracle just happens to be the customer of OpenAI and OpenAI is doing almost the exact same thing Nvidia is doing with OpenAI. Oh, but wait, there's more. At the start of the year, OpenAI joined Stargate, a multi-billion dollar project announced by President Trump. There you go. The government's involved once again. And backed by Oracle and Soft Bank. Oh, okay. So, let me get this straight. Open AAI is spending or committing to spend $300 billion with Oracle, which drives their share price through the roof. And then what Oracle is doing is taking that $300 billion and investing it right back into this project that OpenAI just happens to be a part of to build out the next generation of AI infrastructure. And if they're building out the next generation of AI infrastructure, where do you think that a large portion of that 300 billion is going to go? Oh, that would be Nvidia. I mean, this is come on. How are And I know a lot of people are calling this out as they rightfully should. And this is this really wasn't on my radar. We talked about this briefly in St. Barts, but you again, I'm just such a macro guy. That's really what interests me that I usually don't get into these interactions between the individual companies and what and whatnot. But now this is totally on my radar and I can see why people are up in arms about this. And then here you go. Open AI uh Sam Alman Jensen Wang Wang whatever arrived to attend the state banquet during US president's Donald Trump's state visit to Windsor Castle. They're in here in the tuxedos with all the politicians and Trump and like why like why you're the CEO of a company like focus on making GPUs like Sam like like focus on chat GPT not hallucinating like you got plenty of stuff to do like like but you see what's happening is this is their priority because their priority isn't creating a business their priority isn't sales Their priority isn't driving technology. Their priority is getting in good with the government, right? It's it's the political favors. It goes right back to what Ein Rand was talking about. Pretty much the premise of Atlas Shrugged. Last week, Nvidia put five billion into Intel as a joint venture co-developed data center PC chips with troubled chipmaker. Nvidia also said it invested close to 700 million in UK. Okay. Blah blah blah. So they're investing in uh Intel. And by the way, who else invested in Intel? Oh, that's right. The government. The government bought 10% of Intel. And then, wouldn't you know it, the very next week, Jensen puts in 5 billion or commits to it. Why do you think he did that? Oh, I I'm sure it has nothing to do with buying political favors from the government that will do whatever he needs to create a moat around his business like the visas so the startups can't compete with him in the future. I mean, this is straight collusion with private enterprise, big government and big corporations to create monopolies. And there you go. That's unfortunately the world we live in. We've gone from just milliondoll kind of gold, junior gold miner scammers to hundred million dollar crypto scammers to trillion dollar tech scammers and political scammers. And they're all using the exact same playbook, but they're just at each stage they're just leveling up. and and that's what is being passed off as capitalism and it's just nonsense. We have to put our foot down and make sure that we're defining terms properly. And so for all the lefties out there that point to this and say, "Well, that's the problem with capitalism." No, it's not. Uh that that is the problem with the economic f-word. And you guys know exactly what I'm talking about is defined by Mussolini. That's the problem with corporatism. That's the problem with crony capitalism. What we're seeing right here is the opposite of free market capitalism. So, when we're standing up for capitalism, like I said earlier, we have to make sure that we're defining our terms and that we're not just standing up for capitalism, but we're standing up for free market capitalism. All right, guys. Enjoy the rest of your evening. As always, make sure you're standing up for freedom, liberty, free market, capitalism. We'll see you in the next video.