Keep One Eye On Nvidia...But The Other CLOSELY WATCHING Crypto

It’s tough not to get distracted right now.

Between the unfolding Jensen Huang/Nvidia affair and the potential, eventual associated accounting implications that no one seems to be talking because they’d rather talk about Mr. Huang’s pee-pee, the increasingly uncomfortable questions surrounding the rest of the AI trade (read: 59,375 companies all doing some type of business with, or backstopped by, Nvidia), and the broader circus taking place across financial media (inclusive of Tom Lee, without any clue how Nvidia’s internal investigation will end up happily assuring CNBC viewers that everything’s fine and this SNAFU is not a “thesis changer”), there’s no shortage of things demanding investors’ attention.

I hope you’ve taken your Ritalin.

Because while I’d certainly keep one eye on Jensen, Nvidia, and the rest of the semiconductor complex, I’d keep the other firmly planted on crypto right now.

Especially this weekend. Why? Because there’s a lot hitting markets at once, and almost none of it looks particularly encouraging. Here’s where it stands right now, as best I can see it:

Obviously, there’s the entire Nvidia/tech scandal unfolding up in the nether-regions at the tip of the market’s current bubble. This is an unfolding shit show that, since Sunday, appears to be on pace to reveal one (1) new Jensen Huang extramarital affair per 1.67 days 1.
On top of that, there is a slew of unanswered questions related to Nvidia’s Singapore business, which will be added to myriad of questions about all of the company’s financing relationships, revenue recognition policies, customer relationships, etc. God only know what that will eventually turn up.
We’ve got hotter-than-expected inflation as of this week, a Federal Reserve that may be forced to raise rates more than expected, and a bond market that looks unnerved at best. CPI this week came in hotter than expected, with headline inflation rising 0.4% versus 0.3% expected and core CPI increasing 0.3% versus 0.2% expected, reinforcing concerns about sticky inflation and a hawkish Fed.
Credit markets, particularly those tied to the technology sector and the enormous capital expenditures underpinning the AI boom, are flashing warning signs and have been for the last year.
Meanwhile, private credit, commercial real estate, subprime auto loans, and God knows how many other corners of the financial system are sitting on mountains of questionable valuations, opaque exposures, and potentially catastrophic losses that haven’t yet been recognized.
Some of these assets are marked to models rather than markets. Others are buried in complicated financing structures that make it difficult to know who ultimately owns the risk. They’re the kinds of financial neutron bombs that can sit quietly on someone’s books for years, right up until the moment they don’t.

Which is to say, it’s ugly out there, and I think it’s going to get uglier. Both at Nvidia, in my opinion, and across the rest of the technology complex. I’ve written about why I believe the Nvidia story could become considerably more problematic here: I Still Think There's More Bad News Coming

But just as I’d keep one eye on Nvidia, semiconductors, AI infrastructure, and the sprawling collection of companies participating in what increasingly looks like a sector-wide financial circlejerk, I’d keep the other on cryptocurrency. Because crypto may be telling us something important about the condition of the financial system, and I don’t think investors should ignore it. Last night, the message got louder when...(READ THIS FULL COLUMN 100% FREE, NO PAYWALL)

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