Nvidia says it isn't using 'circular financing' schemes. 2 famous short sellers disagree.

Nvidia (NVDA) sent a memo to Wall Street analysts implicit the play arguing that it is not engaged successful vendor financing, a arguable signifier successful which suppliers put successful oregon widen loans to their ain customers.

Famed abbreviated sellers Jim Chanos and Michael Burry aren't truthful sure.

Nvidia wrote a seven-page papers — archetypal reported by Barron's connected Tuesday greeting — rebuffing claims that it invests successful its ain customers to inflate its revenue. The memo was written successful effect to a newsletter from a little-known Substack writer past week claiming that the $5 trillion AI chipmaker is engaged successful a "circular financing scheme" — utilizing vendor financing to boost income — drafting parallels betwixt Nvidia and celebrated dot-com epoch accounting frauds committed by Enron and Lucent.

Enron is notorious for manipulating its accounting and utilizing off-balance expanse indebtedness to fell losses successful its broadband concern during the net boom. Internet infrastructure supplier Lucent, meanwhile, is champion known for aggressively investing successful and extending loans to galore of its loss-making telecom customers — who past utilized the funds to bargain Lucent instrumentality that they couldn't person different afforded. When the dot-com bubble burst and telecom startups couldn't wage backmost Lucent, the institution had to constitute down gross tied to those transactions and mislaid billions of dollars.

Chanos, who is celebrated for predicting the autumn of Enron, thinks the examination betwixt Nvidia and Lucent bears weight.

"They're [Nvidia is] putting wealth into money-losing companies successful bid for those companies to bid their chips," Chanos told Yahoo Finance successful an interview.

Nvidia has invested heavy successful its ain customers — from ChatGPT developer OpenAI (OPAI.PVT) to Elon Musk's xAI (XAAI.PVT) to a slew of AI unreality firms, including CoreWeave (CRWV) and Nebius (NBIS) — and those investments person raised eyebrows connected Wall Street.

"NVIDIA does not lucifer humanities accounting frauds due to the fact that NVIDIA's underlying concern is economically sound, our reporting is implicit and transparent, and we attraction astir our estimation for integrity," Nvidia wrote successful its memo, which was obtained by Yahoo Finance.

"[U]nlike Lucent, NVIDIA does not trust connected vendor financing arrangements to turn revenue," the institution continued. Nvidia noted that successful emblematic vendor financing agreements, customers wage backmost suppliers implicit years. Meanwhile, the chipmaker said its customers wage the institution wrong 53 days aft purchasing its chips.

Burry, the "Big Short" capitalist who predicted the illness of the US lodging marketplace successful 2008, went further than Chanos successful a station connected X past week, saying Nvidia is 1 of aggregate companies successful the AI marketplace with "suspicious gross recognition" owed to investments successful its customers.