"Nvidia ( NASDAQ:NVDA ) is facing intensifying scrutiny over allegations of circular financing in its AI chip ecosystem. Critics claim the company engages in a self-reinforcing loop: Nvidia invests in customers like CoreWeave (N ) and privately-held Lambda, which then buy more Nvidia GPUs using that capital, artificially inflating sales. This echoes past concerns with stock-based compensation and chip depreciation practices that boost short-term revenues."
"Nvidia has rebutted these claims as misrepresentations , emphasizing there is genuine demand from hyperscalers. Yet critical voices are growing louder, with short sellers warning of hidden risks spreading a contagion. Undeterred, Nvidia is apparently thumbing its nose at critics, announcing this morning a new $2 billion investment in chip designer Synopsys ( NASDAQ:SNPS ), signaling confidence - or perhaps defiance - in deepening ties with its key partners."
"He insists Nvidia isn't an Enron-style deception , but rather more closely mirrors Cisco Systems ( NASDAQ:CSCO ) during the dot-com bubble days. "I am not claiming Nvidia is Enron," Burry recently wrote on his Cassandra Unchained Substack. "It is clearly Cisco." He points to Nvidia's role as AI's "picks and shovels" provider. Like Cisco's 3,800% surge between 1995 and 2000 - which was followed by a 78% loss of value - Nvidia's hype-driven growth risks overcapacity if AI demand falters."
Nvidia faces allegations that it engages in circular financing within its AI chip ecosystem, investing in customers such as CoreWeave and Lambda that then buy more Nvidia GPUs with that capital, potentially inflating sales. Critics link this pattern to prior concerns about stock-based compensation and altered chip depreciation that boost short-term revenue. Nvidia disputes the characterizations and insists on real hyperscaler demand, while announcing a $2 billion investment in Synopsys. Michael Burry argues Nvidia resembles Cisco during the dot-com era rather than Enron, warning that hype-driven growth and hyperscaler commitments could create overcapacity, stretched GPU lifecycles, and a capex-driven downturn.
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