After NVIDIA and CEO Jensen Huang announced their latest initiative last week, which now turns the firm's GPU into an asset class similar to financial securities, Trump advisor David Sacks discussed the biggest risk to the plan and the ongoing AI buildout. NVIDIA's latest announcement will also see the firm backstop the GPUs by providing residual support, Huang outlined. In his appearance on the All In Podcast, Sacks outlined that an oversupply of compute remained the biggest risk to the AI buildout.

With big tech's spending on the data center infrastructure buildout continuing to scale to new highs, David Sacks, who serves on the President's science and technology advisory council, discussed the biggest risk to NVIDIA's partnership with the investment community to establish independent financing platforms to make GPUs a financeable and income-producing asset.

Sacks remarked that the biggest risk to the initiative was not on the demand side. Instead, he outlined:

"The biggest risk, to me, is not on the demand side, the biggest risk is that you get a glut of compute and you get an overbuild. And, in the same way we had dark fiber after the dotcom crash, if you have dark GPUs that would be a disaster for everyone, especially if you built out your compute infrastructure expecting a spot price of $30-$50/watt, as, you know, Elon said they were expecting, right."

Sacks' comments referred to remarks made by Elon Musk to SpaceX employees in a company call where he outlined that the value of AI compute was roughly $30 to $50 per watt. The executive added that the value could enable him to earn between $300 billion and $500 billion in revenue by the end of 2027 through providing a gigawatt of compute.

Yet, soon, compute infrastructure provider Nebius outlined that its multi-year cloud agreements were worth between $20 million and $25 million per megawatt for annual contract value. Nebius' statement implied that Musk intended to. charge significantly more for short-term agreements.

Sacks continued and shared that oversupply risks in the compute market, coupled with expectations of the price per watt, could create a situation similar to the Dotcom crash, where fiber prices collapsed in the aftermath to create 'dark fiber:'

"So, if all of a sudden, there are too many people racing to supply this compute and now there's an oversupply, and the market crashes, that's be the risk factor. In a weird way, all of the political headwinds ensure against that outcome. Because it is so hard to build data centers for all the reasons we said. There is a whole moral panic slash hysteria slash hoax going on, that actually, it's those political headwinds I think will almost guarantee that there is not an oversupply relative to the exponentially growing demand. So in a weird way, you're protected against that."

As for the reasons behind NVIDIA's latest initiative, Sacks believes that the primary objective is to alleviate financing constraints currently being faced to meet the total addressable market (TAM) estimates for the AI infrastructure buildout:

"So, just to take one example. Elon plans to add somewhere around six to eight gigawatts next year. We know that that would cost three to four hundred billion dollars of Capex. The company just raised a hundred billion in its equity and debt offerings. So obviously, they would have to go out and finance that somehow. And as we talked about on our previous episode, the simplest way to finance it would be to get seller financing from NVIDIA. . .so now, Jensen is creating, you could say, the line of credit using these big banks, using these big private equity shops. And he's making that available and that's going to now benefit all these downstream purchasers."

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