📈  Chart of the Week 11/23/2025

By Michael Allison, CFA

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This week’s Chart shows the Nasdaq 100 Index plotted against a number of historical bubbles. When investment bubbles are discussed, it’s common for folks to ask, “Where are we in the cycle?” I find historical comparisons interesting, but not necessarily helpful.

I think that the end of an investment cycle approaches as financial stress begins to show in the results of the players in the ecosystem, and the accounting gets more and more, err…creative.

As mentioned above, NVDA’s recent earnings results seemed fine until investors sunk their teeth into the other financial statements. That where a couple of potentially troubling accounting measures which gave rise to creeping doubts as to the health and durability of the AI buildout.

First, there was a $4.8 billion build in inventories, from $15.0 billion in Q2 to $19.8 billion in Q3. This runs counter to management’s ongoing narrative of demand in excess of supply and manufacturing capacity constraints. In my mind, companies with substantial and growing order backlogs do not build inventories. 🤔

Also, Days Sales Outstanding (DSO) grew for the third consecutive quarter, from 48.2 days in Q1, 50.7 days in Q2, and 53.3 days in Q3. DSO (Accounts Receivable ÷ Revenues × Days in Period) measures the average time it takes to collect the cash from the booking of company revenues. It is a key indicator of the financial health of a company’s customers. Extended collection terms doesn’t inspire confidence in that regard. 🤔

Going back to this week’s Chart, I have no idea “where we are in the cycle”. But given the breakneck speed at which the AI spending cycle has run thus far, I am increasingly inclined to believe that it may well be a good bit shorter than historical comparisons.

Stay vigilant.

Source: Nvidia Corporation SEC filings.

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