alt Hacker NewsSo someone correct me but I think this is sort of an accounting trick. When Microsoft buys an Nvidia GPU for $100, it will claim that it lasts 5 years, so writes down $20 in the expense column for this year. Meanwhile Nvidia takes all the profit at time of sale, $100. So for each GPU bought, SP500 logs $80 of profit, even though no money entered or left the SP500.
(Yes of course the GPU cost something to make, but the margins on these things are very high. The point is that revenue is immediate while capital expenses are amortized. And capital expenditure has gone way up lately.)
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What's wrong with this though? Value was created (a physical GPU), so assets go up.
Different people/orgs get a different slice of that value.
Almost, the depreciation is 2 years, but for some reason they wrote it up like 5 for now. But anyone buy nvdia chips is already maxxed out on debt for the next 5 years and the new chips are here shortly. What happens to those 100's of billions in chips?? They get written off. We're already seeing them in cars. There is no shortage except on the scrutiny of the whole securities thing.
> When Microsoft buys an Nvidia GPU for $100, it will claim that it lasts 5 years, so writes down $20 in the expense column for this year. Meanwhile Nvidia takes all the profit at time of sale, $100
Nvidia would log $64 of profit against a $100 sale [1]. (The R&D cost to develop the chip have already been booked.)
> for each GPU bought, SP500 logs $80 of profit, even though no money entered or left the SP500
In your example the S&P would log ~$40 of earnings. (About because taxes.)
[1] https://www.macrotrends.net/stocks/charts/NVDA/nvidia/profit...