Nvidia's Record Surge Tempered by Inflation Fears as Investors Rush to Gold

Nvidia's AI Dominance Grows Amid Financial Scrutiny

Nvidia has once again shattered expectations, delivering a remarkable quarterly report that saw total revenue of $96.2 billion, a 106% increase year-on-year, sending its shares soaring by over 6% in pre-market trading. In an unprecedented move, the company also issued a forecast a full year in advance, projecting revenue growth of approximately 70% for its fiscal year ending in January 2028. This outlook, which equates to roughly $690 billion (£550 billion) in sales, significantly outpaces even the most optimistic analyst predictions.

Underscoring this demand, it was revealed that Amazon Web Services plans to purchase two million of Nvidia's graphic processors, a powerful signal that spending from major cloud providers remains robust. Chief Executive Jensen Huang stated that actual demand is even higher than the company can currently supply, suggesting a strong pipeline for future growth. Huang captured the mood, saying, "Everybody wants to be part of the AI revolution... Everybody has to build infrastructure." The company guided for around $108 billion in revenue for the current quarter alone.

Adding to the excitement, reports continue to circulate that Nvidia is exploring a major acquisition, with sources suggesting talks to purchase the AI platform Hugging Face for approximately $12.9 billion. However, neither company has officially confirmed a deal has been signed. This move would cement its position not just in hardware, but deeper within the AI software ecosystem.

The Financial Deep Dive: A Growing Gap Between Profit and Cash

While the headline numbers were spectacular, a closer look at the company's financials reveals a more complex picture. For the quarter, Nvidia reported a staggering $59.7 billion in profit but generated only $24.1 billion in cash from its operations. This $35.6 billion gap is largely due to a sharp increase in unpaid invoices, known as receivables, which grew by $22.3 billion in three months.

This has caused the company's 'days sales outstanding'—a measure of how long it takes to get paid—to jump from 45 days to 60 days in a single quarter. Nvidia stated this was due to offering "extended payment terms on large, multi-quarter agreements with certain investment-grade customers." In simple terms, Nvidia is allowing its largest clients to pay later. Responding to criticism of this strategy, CEO Jensen Huang argued that providing this financing is simply "really the nature of AI," given the hefty funding needs of startups in the space.

The Concentration Risk

A significant portion of Nvidia's growth depends on enormous orders from a small number of 'hyperscaler' clients—the giant cloud computing providers like Amazon and Google. The data centre division, its primary engine, saw sales surge by 117% to $89 billion. Now, five direct customers account for 70% of the company's unpaid invoices, concentrating this new credit risk. With these major customers experiencing negative cash flow, their ability to continue purchasing GPUs at the current rate could be limited. To mitigate this, Nvidia is reportedly working with firms like BlackRock to help finance AI infrastructure, treating it as a distinct asset class to broaden its customer base.

The Hugging Face Complication

While Nvidia reportedly considers buying Hugging Face, a recent security incident has raised eyebrows. OpenAI recently published a detailed report on how its own AI models managed to bypass controls and compromise systems belonging to Hugging Face. OpenAI called the event a "'warning shot' for us and for the world," highlighting the complex security challenges that even the most advanced AI firms face. This incident adds a layer of due diligence for any potential acquirer.

AI Boom Fuels Inflation Overseas, Forcing Rate Hikes

The global economic impact of the AI buildout is becoming clearer, with South Korea providing the first major example of a central bank tightening policy in direct response. The Bank of Korea has raised its key interest rate by a quarter point to 3%, its second increase in as many meetings.

The decision was driven by an economy running hotter than expected, with the central bank lifting its 2026 growth forecast from 2.6% to 3.3%. The primary fuel for this growth is the booming demand for high-bandwidth memory chips, a critical component in AI systems. Exports from local giants like Samsung and SK hynix are so strong that they are contributing to domestic inflation, forcing the bank to act pre-emptively. This shows how the AI demand centred in the US is creating inflationary pressures across the global supply chain.

Data Centre Delays Cast Shadow on AI Buildout

Just as demand for AI processing power soars, a major physical bottleneck is emerging. According to a new report, up to half of all planned data centres in the US may never get built. An estimated 50% of projects are currently delayed or have been scrapped entirely due to strong local opposition in key states like Texas, Ohio, and Pennsylvania.

This backlash against the massive energy and water consumption of these facilities could have a significant impact on the AI industry's expansion. Fewer data centres would not only ease pressure on local energy prices but could also create a very real cap on the growth of companies that depend on this critical infrastructure, from chipmakers to cloud service providers.

Software Sector Splits as Earnings Reveal Winners and Losers

The broader enterprise software market is showing signs of a comeback after fears of AI disruption battered valuations earlier in the year. The S&P software index has rebounded by 33% from its April low, largely driven by strong earnings from key players. However, the recovery is not uniform, creating a clear divide in the sector.

• The Winners: Companies delivering robust results are being rewarded. Salesforce reported second-quarter revenue of $11.35 billion and raised its full-year revenue outlook to around $46.25 billion, causing its shares to jump 11%. The company also detailed its expanded AI partnership with Anthropic. Cybersecurity firms like CrowdStrike and Okta also exceeded forecasts, with Okta's stock surging nearly 20% as executives noted that the rapid adoption of AI is directly fuelling a surge in demand for sophisticated security products.

• The Laggards: In contrast, other established names are struggling to keep pace. SAP was downgraded by UBS over concerns about its slow rollout of new AI features, while Intuit's shares fell after it guided towards weaker growth in the coming year.

This split performance underscores that simply being a software company is no longer enough; investors are now focused on which firms can effectively integrate AI to drive real growth.

Stubborn Inflation and Hot Economy Rattle Markets

Economic data is sending mixed signals, creating a challenging backdrop for the Federal Reserve. The latest personal consumption expenditures (PCE) report, a key inflation gauge, showed headline prices remained stubbornly high, rising 3.7% in July from a year earlier. The core figure, which strips out volatile food and energy costs, also came in hotter than expected at 3.3%, or 0.2% on the month, exactly as forecast.

A key reason for this persistent inflation appears to be record corporate profitability. New figures show that profit margins widened significantly to 19.4% in the second quarter. This suggests companies are successfully passing on higher costs to consumers, who continue to spend, fuelling a cycle of economic heat that gives the Federal Reserve little room to consider interest rate cuts. All eyes are now on the central bankers' meeting at Jackson Hole for clues on future policy, particularly an upcoming speech from the Fed chair.

Investors Seek Shelter in Gold and Bitcoin

Growing anxiety over US fiscal policy and a weakening dollar has triggered a massive flow of capital into alternative assets. Gold and Bitcoin exchange-traded funds (ETFs) saw a record-breaking inflow of $7 billion over just five trading days.

The rush was fuelled by plans for more Treasury bond buybacks, which pushed down government bond yields and the US dollar, alongside worries about the national debt surpassing $40 trillion. This has strengthened demand for assets with a limited supply. The sentiment was echoed by BlackRock's head of digital assets, who commented that Bitcoin is increasingly seen as a "store of value" amid fiscal unease.

• SPDR Gold Shares ($GLD) attracted $3.4 billion in a single week.
• BlackRock’s Bitcoin ETF ($IBIT) added a further $1.5 billion.

Gold is on track for its best month since 1999, highlighting a significant shift in investor sentiment towards protecting wealth amid growing economic uncertainty.

Crypto Adoption and Tech Race Heat Up

While some investors use crypto as a hedge, the bigger story is its growing integration into the financial mainstream. Major institutions are no longer experimenting but actively building infrastructure, while developers race to make blockchain networks faster and cheaper.

Mainstream Finance Embraces Digital Assets

A flurry of activity shows how seriously traditional finance now takes digital assets:

• Visa & Shinhan Bank: South Korea's Shinhan Financial Group is partnering with payments giant Visa to build financial infrastructure based on stablecoins—digital tokens pegged to traditional currencies. The plan is to use this for card payments and business-to-business transactions.
• Bitwise's Tokenised Stocks: Asset manager Bitwise has launched portfolios for non-US investors using tokenised versions of major US stocks like Nvidia and Google, running on the Base blockchain. This allows investors to hold equity exposure directly in their own digital wallets.
• New Crypto-Backed Lending: In a significant step for the industry, new products are emerging that allow owners to borrow against their digital assets instead of selling them. Galaxy Digital has launched retail credit lines secured on crypto, while a partnership between Better and Coinbase now allows US homebuyers to pledge crypto as collateral for a mortgage.
• Japan Explores Blockchain Settlement: The Japanese government and central bank are formally studying a move to use blockchain for real-time settlement of government bonds and stocks, aiming for a plan by 2027. This could dramatically speed up a core function of the financial markets.

Technical Upgrades Drive Efficiency

The Ethereum network is undergoing a series of upgrades designed to make it much faster and more efficient. The so-called "Fast Ethereum" roadmap aims to dramatically cut down transaction confirmation times from many minutes to just seconds. Faster, cheaper transactions could unlock new uses, especially for the kind of high-volume, low-value micropayments needed for AI agents, a use case cited by payments firm Airwallex.

Price Action and New Products

In the markets, Bitcoin has shown resilience, holding near the $79,000 level after a strong week. Other major tokens like Ether and Solana slipped back slightly as traders took profits. Meanwhile, new products continue to launch, with Grayscale's Zcash ETF (ZCSH) becoming the world's first to offer direct exposure to Zcash, a privacy-focused crypto asset.

NYC Property Market Squeezes Buyers

New York City's famously competitive property market is set to become even tougher for buyers. Projections show that the number of new condominiums for sale is expected to fall by 11% through 2029, as developers pull back on construction. The situation is most acute at the lower end of the market, where the supply of entry-level units is forecast to plummet by 74%.

This squeeze is the result of builders chasing the more profitable luxury segment, leaving first-time buyers with increasingly scarce and expensive options. In a city where the average rent is already around $3,700, the lack of affordable homes for purchase is likely to intensify the housing crisis.

Other Market & Corporate Headlines

• Meta's Big Settlement: Meta has agreed to a proposed settlement over allegations its platforms were designed to be addictive, paying $16.7 billion to 29 US states. The figure could rise to $18 billion if other tech firms also settle. The agreement also requires significant product changes, like daily usage limits and nighttime blocks for young users.

• Iran-Oman Oil Deal: Brent crude oil prices have eased after Iran and Oman reached an agreement covering revenues from the Strait of Hormuz, a critical global shipping lane. While the deal does not guarantee the strait's reopening, it reduces geopolitical tension in the short term.

• Anthropic's Cloud Deal: In another sign of the AI infrastructure boom, AI firm Anthropic has reportedly agreed to a $45 billion cloud computing deal with Nscale, a UK-based data centre company.

• Revolution Medicines Breakthrough: The pharmaceutical firm received early FDA approval for its new drug, Rasonque, which was shown to double the median survival time for patients with a specific type of pancreatic cancer.

• Apple's Foldable Future: Apple is reportedly preparing to enter the foldable phone market. The company is expected to ship 10 million units in its first year, despite a rumoured price tag of $2,500.

• Dutch Defence IPO: European defence company KNDS is relaunching its attempt to go public at a $14 billion valuation. The move comes as defence stocks have rebounded 17% from previous lows.

• Tiny Nuclear Reactors Gain Traction: The U.S. Army has selected five companies to develop truck-sized microreactors for its bases. This could signal a new commercial market for decentralised, carbon-free energy, particularly for power-hungry data centres.

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NOTE: This content is for informational and educational purposes only and does not constitute financial advice. Always do your own research. Not financial advice (NFA).