Short Thought: Nvidia Ratchets Up the Risk

Welcome to one short thought. Just going through the Nvidia numbers. I would like to highlight for you one specific aspect of their financials that I find troubling.

The February 2026 Form 10-K shows purchase obligations at $95.2 billion, up from $16.1 billion the same time last year. This is because TSMC demanded longer term contracts and cash as it had to build out custom semiconductor fabrication and packaging capacity for NVDA’s new technology. That has not been the normal course of business until recently. It is a testament to the extremely complex monsters Nvidia’s “chips” have become.

NVDA also warns these obligations are “expected to continue to grow and become a greater portion of supply.”

To be clear, NVDA has been forced to place non-cancellable purchase orders well before demand is known. This appears structural to the new trajectory of product development and not temporary.

On the earnings call, CFO Colette Kress said “inventory grew 8% quarter over quarter, while purchase commitments also increased significantly, and we have strategically secured inventory and capacity to meet beyond the next several quarters, further out in time than usual.”

When Days Inventory Outstanding and the Cash Conversion Cycle spiked last year, it was because of an export control shock.