Nvidia Faces Dual Threats from AI Chip Competition and Financial Scrutiny

Nvidia CEO Jensen Huang has moved to calm investors amid reports that Meta is in advanced discussions to purchase billions of dollars worth of Google's tensor processing units (TPUs). Huang emphasized that Nvidia maintains a unique position in the AI semiconductor market, describing the landscape as extremely large and complex, and asserting that even a major TPU deal would not significantly reduce Nvidia's opportunities.

Meta's role in the chip rivalry is underscored by its 2025 capital expenditure estimate of $70–72 billion, with much of this spending directed towards AI infrastructure. However, the market responded cautiously, with Meta's shares falling over 12% after the announcement, as analysts questioned the long-term returns on such massive investments.

Google, meanwhile, is emerging as a potential beneficiary, with Google Cloud reporting a 34% year-over-year revenue jump to $15.15 billion in Q3 2025, largely driven by AI services. A bulk TPU purchase by Meta could further boost Google's cloud business.

In a separate development, short sellers Jim Chanos and Michael Burry have criticized Nvidia's financial practices. Chanos accused Nvidia of using vendor financing by investing in cash-burning companies like OpenAI, xAI, CoreWeave, and Nebius to sustain chip orders, drawing comparisons to historical accounting scandals such as Enron and Lucent.

Nvidia denied these allegations in a seven-page memo to analysts, stating that it does not use vendor financing and that customers pay within 53 days. The company also addressed its $4.5 trillion valuation, acknowledging lower gross margins and higher warranty costs for its new Blackwell chips. Both Chanos and Burry warned of risks from overbuilding in the AI sector, with Chanos noting that if demand falls short by 2027 or 2028, orders could be canceled, posing a significant market risk.