Nvidia's last earnings call took the risk out of its gross margins for six quarters, Ben Reitzes says, and he does not believe any other semiconductor or hardware company can claim the same.
Most of the argument about the AI build-out is over whether it can be financed. Reitzes wants the companies doing the building to spend the next year on a different problem: convincing the communities that do not want a data center nearby that they are better off with one.
"And what I mean is they got to get together as a group and they got to say, we have to get this world ready for UBI and the data center backlash."
Reitzes runs research at Melius, has a buy rating on Nvidia and raised his price target after last week's results — the host put the new number at 420.
I listened to the full segment so you can skip it.
Here are the 6 takeaways that matter.
👤 Guest: Ben Reitzes, head of research at Melius, who has a buy rating on Nvidia and raised his price target after last week's earnings
🎙️ Host: David Faber, co-anchor of Squawk on the Street on CNBC
📰 Published: 1 September 2026 on CNBC (Squawk on the Street)
🟢 Spotify | 🟣 Apple Podcasts | 🔗 Episode page | ⏱️ 8 min
Key Takeaways
Nvidia's last call fixed its gross margins for six quarters, which no rival can match Reitzes says a semiconductor stock only works once gross margins stabilize
Nvidia will give open-weight models away because the money is in the hardware they run on He calls it a razor-and-blade strategy that only Nvidia is positioned to run Free open models also force Anthropic and OpenAI to spend more to stay ahead of them
The industry's biggest unpriced risk is the public, not the financing His fix is a coordinated giveback of 5–10% and visibly lower power bills
Reitzes wants the AI industry to make the case for universal basic income before politicians do
Faber's counter is that data centers have cost states tax revenue rather than raised it
Broadcom's next quarter does not matter; the 2031 Google contract does He says the stock trades at a single-digit multiple on 2028 estimates
1. What the Call De-Risked
Faber introduced the segment on the morning's news — Anthropic signing a $35 billion deal with the Nvidia-backed cloud provider Lambda, in which Nvidia supplies the chips and holds the lease on the Texas data center — and asked what catalyst moves Nvidia's stock materially higher from here.
Reitzes opened with a joke. "The catalyst is my mom's birthday. She's turning 80."
His real answer was the margin guidance. "I think that they de-risk margins for the next six quarters. No other semis or hardware company can really say that." He said Nvidia has the buying power to do it
He tied it to the one thing that makes a chip stock move. "So gross margins are what need to stabilize in semis for a stock to work, as you know."
Faber's framing was that the stock has gone nowhere on it. He said Nvidia's price target went up with earnings last week, to 420 on his reading, and that the shares are roughly back to where they sat before the results
2. Nvidia's Apple Moment
The comparison Reitzes reached for twice was not another chip company.
The parallel is Apple at its cheapest. He said Apple stopped working, fell to 12 times earnings, and had to work out both what to do with its cash pile and how to explain its next phase
Faber pushed back that saying it does not make the market believe it. Reitzes answered that it took a long time for anyone to work out Apple's services business, that it did not work right away, and that it only looks obvious in hindsight
His conclusion is that the chief executive has to keep repeating the case. Reitzes said Jensen Huang sees a coming singularity that others, naming Michael Burry as an example, do not, and that the two things the market will eventually accept are that the chips last longer than assumed and that token consumption keeps growing
3. Free Models, Paid Stack
The strategy call is the reason Reitzes thinks the stock re-rates, and it involves Nvidia giving something away.
He expects Nvidia to promote open models even while its largest customers sell closed ones. "I think that the promoting an ecosystem that gives away open and open weight models that run best on their stack is a brilliant strategy."
The business model is the printer and the ink. "So you give away the models to get the blade." Free open-weight models that run best on Nvidia hardware sell the hardware, the software and the infrastructure around it
The demand he expects it to unlock is robotics and enterprise work. Reitzes said the strategy explodes with physical artificial intelligence, because machines in the real world need large numbers of custom models rather than one general one
The second-order effect is that it forces the labs to spend more. He said Anthropic and OpenAI will invest heavily to stay ahead of free open models and remain at the frontier, which he described as a flywheel
4. Tokens Are the New Oil
Asked what would make the market see any of this, Reitzes moved from the stock to the economy around it.
His framing for AI output is a commodity. "Tokens are the oil."
He extended it to a whole political economy. "And so somebody needs to lay out like, this is like Saudi Arabia, but instead of oil, we have tokens and you know, you're going to tax them."
The local promise he wants made is specific. "If you live in a community that has a data center, your property taxes are going to go to zero or lower." He said power bills would fall too, because the plants are built behind the meter, meaning the generation sits on the site and does not run through the public grid
He does not want the Gulf model copied wholesale. Reitzes said Saudi Arabia is not the model to import and that a version of it has to be made American
5. Paying Off the Backlash
The longest stretch of the interview was not about Nvidia's numbers at all.
His proposal is industry-wide coordination, not one company's public relations. "Right now, what they need to do is get together as an industry and say, hey, look, whether it's 5%, 10%, we give back to communities."
He wants the industry to make the case for universal basic income first. "And what I mean is they got to get together as a group and they got to say, we have to get this world ready for UBI and the data center backlash." Faber stopped to spell it out for viewers: "We should say universal basic income is what you're talking about when you say UBI."
Faber put it to him that the objection may be to AI itself rather than to water or power. Reitzes said material benefits would change minds quickly, and that people like free things
Faber's hard counter was the record so far. "I mean, the only problem is that has not been the experience to date." He said Georgia is a state where bringing data centers in has cost tax revenue
Faber also named the size of what is being proposed. "But no, but then you're talking about a realignment of our economic system." Reitzes said the case has to be laid out clearly, and that it probably has to come from Elon Musk and the people around him Faber had cited Musk's claim of 20 to 30 trillion added to the world economy, and asked whether people would still have jobs Reitzes said Musk is often wrong on timing and right on the trend
6. Broadcom Before Earnings
Faber closed on the week's other large chip result, noting Broadcom carries a $1.7 trillion market value, above Meta's.
Reitzes told investors to ignore the print. "I think the quarter and even the next few quarters mean nothing."
His valuation case runs off 2028 estimates. He said the stock is probably trading at a single-digit multiple on those numbers, which he treats as very cheap
What he wants from management is duration on the Google relationship. "And Hock needs to say our share with Google is rock solid. It goes even past 2031."
He also wants a capacity forecast in power terms. Reitzes said Broadcom should lay out the AI gigawatts it will serve through 2028 and beyond — a "gigawatt walk" — so investors can see the long-term earnings power rather than the quarter
He is backing the chief executive after a poor call. "I think you should not underestimate Hock E. Tan." He noted the last conference call, 90 days earlier, went badly, and said the chance of two in a row is slim
Bonus Insights
Reitzes likes Dell into its results the same evening. "And Dell tonight I think Dell is going to be pretty good. I love those guys." He described the company as the route by which Nvidia reaches enterprise buyers
Faber cut the exchange off by calling the political economy argument a much longer conversation than the segment had room for
Reitzes' bottom line is that Nvidia's next re-rating comes from giving models away rather than selling them, and that the industry's unpriced risk is a public that turns on data centers before any of the benefits reach it.
Products, Companies & Tools Mentioned
Nvidia (Buy-rated, with margins Reitzes says are de-risked for six quarters and an open-model strategy he calls razor-and-blade)
Anthropic and Lambda (The $35 billion cloud deal that opened the segment, with Nvidia supplying chips and holding the Texas data-center lease)
OpenAI (With Anthropic, the frontier labs Reitzes says will spend more to stay ahead of free open-weight models)
Apple (His analogy for Nvidia: a stock at 12 times earnings that had to explain its next phase before the market believed it)
Broadcom (A $1.7 trillion company he says trades at a single-digit multiple on 2028 estimates, ahead of results)
Google (The customer whose share of Broadcom's business Reitzes wants confirmed as secure past 2031)
Meta (Faber's yardstick for Broadcom's size — Broadcom's market value is the larger of the two)
Dell (Reporting the same evening; Reitzes expects a good quarter and calls it Nvidia's route into enterprise buyers)
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