• Nvidia’s memo refutes links to past accounting scandals, stating no use of special-purpose vehicles or vendor financing.

• Strategic investments total around $4.7 billion year-to-date, a small fraction of global revenue and private capital pools.

• Operating cash flow reached $23.8 billion in Q3, with free cash flow at 98% of net income since 2018, demonstrating strong financial health.

Discover Nvidia’s response to Michael Burry’s fraud claims amid AI boom: no circular flows, transparent accounting. Stay informed on tech-finance intersections in crypto and AI investments – read more now.

What Are the Fraud Claims Against Nvidia by Michael Burry?

Nvidia fraud claims stem from investor Michael Burry’s assertions linking the company’s AI-driven growth to potential accounting irregularities, including a reference to an algorithm detecting a supposed $610 billion fraud. Nvidia’s detailed memo to analysts counters these by explaining its business model, SEC filings, and capital flows in the AI ecosystem. The company highlights that such accusations misrepresent its straightforward operations without reliance on controversial financing structures.

How Does Nvidia Address Circular Financing Allegations?

Nvidia directly disputes any notion of circular cash flows, noting its strategic investments reached $3.7 billion in the third quarter and $4.7 billion year-to-date. These figures represent a minor portion when compared to Nvidia’s overall revenue and the vast global private capital market, according to company disclosures. Portfolio companies primarily secure funding from independent third parties, not recycled internal capital, ensuring genuine economic activity.

Burry’s warnings, shared via social media, focused on tech firms potentially underreporting depreciation on AI hardware, estimating an industry-wide understatement of $176 billion from 2026 to 2028. He argued that extending useful-life assumptions for equipment with a 2-3 year cycle artificially inflates earnings, a tactic he labeled as a common modern fraud. Nvidia’s response underscores its consistent days sales outstanding at 53 days, unchanged for years, and absence of special-purpose vehicles or vendor financing.

Financial data supports Nvidia’s position: no significant guarantees appear in filings, with only one minor item that does not impact results. This transparency aligns with regulatory standards, countering Burry’s broader concerns about hyperscalers like Oracle and Meta, where he projected earnings could exceed true figures by over 20% by decade’s end due to depreciation gaps.

Frequently Asked Questions

What triggered Michael Burry’s Nvidia fraud claims?

Michael Burry’s claims arose from an article titled “The Algorithm That Detected a $610B Fraud,” which he connected to Nvidia’s AI operations. He accused the company of ties to accounting manipulations, including lower-than-appropriate depreciation on AI hardware, potentially boosting earnings artificially across the tech sector.

Is Nvidia involved in any SEC investigations related to fraud?

Nvidia states it is unaware of any ongoing SEC probes concerning its practices. The company maintains full compliance with reporting standards, with crypto market volatility having no material effect on its accounting, as detailed in recent financial disclosures.

Key Takeaways

• Transparent Financials: Nvidia reports steady payment terms and high free cash flow conversion rates, refuting circular financing narratives.
• Investment Scale: Strategic AI investments are modest relative to global markets, sourced from third-party funding to support ecosystem growth.
• Expert Validation: Analysts like Simon Leopold affirm Nvidia’s fundamentals, viewing its capital deployment as shareholder-aligned without fraud risks.

Conclusion

In summary, Nvidia’s comprehensive rebuttal to Nvidia fraud claims by Michael Burry reinforces its commitment to accurate financial reporting, robust cash flows, and prudent AI investments. With operating cash flow hitting $23.8 billion in the third quarter and minimal exposure to accounting risks, the company positions itself strongly in the evolving tech landscape. As AI and related sectors like crypto continue to intersect, investors should monitor these developments for informed decision-making in 2025 and beyond.

Nvidia’s memo, shared via Raymond James with clients, arrived shortly after Burry’s public statements tying the chipmaker to alleged irregularities. The document meticulously breaks down misconceptions about Nvidia’s operations, emphasizing that attempts to associate its model with historical accounting failures are unfounded. For instance, Nvidia operates without special-purpose vehicles or vendor financing, and its sole filing guarantee is negligible in scale.

Payment cycles remain predictable, with days sales outstanding consistently at 53, a metric stable over multiple years. The alleged $610 billion circular-financing loop is dismissed outright, given the proportionality of Nvidia’s $3.7 billion quarterly and $4.7 billion year-to-date investments against broader economic benchmarks.

Addressing portfolio dynamics, Nvidia clarifies that external partners raise capital externally, avoiding any recycling of funds that could suggest impropriety. This comes amid Burry’s extended critiques, including his X post on hyperscalers’ depreciation practices, which he deems a prevalent earnings manipulation tactic.

Burry’s projection of $176 billion in understated depreciation from 2026-2028 highlights potential overstatement of earnings for firms like Oracle and Meta by more than 20% by 2030. His disclosed put-option bets on AI stocks, including Nvidia and Palantir, as of September 30, underscore his bearish outlook on the sector’s sustainability.

Nvidia’s defense extends to cash flow integrity, boasting $23.8 billion in operating cash and $22.1 billion in free cash for the third quarter. Since fiscal 2018, free cash flow has averaged 98% of GAAP net income, a testament to operational efficiency. Inventory levels align with product ramp-ups, and guidance remains on track.

On margins and risks, Nvidia attributes elevated warranty costs to the advanced Blackwell architecture’s complexity, properly accrued without exaggeration. Bad-debt provisions are minimal and categorized under general expenses. Crypto volatility, often intertwined with Nvidia’s GPU demand in mining, poses no accounting distortions.

Insider selling allegations are clarified as third-party fund activities, not executive actions. Raymond James’ Simon Leopold praised the memo, noting the fraud narrative clashes with Nvidia’s solid fundamentals and AI cycle structure. He highlighted Nvidia’s software ecosystem, product cadence, and duty to optimize shareholder capital through AI ventures.

Leopold maintains optimism for Nvidia’s scalability into 2026 Blackwell peaks, backed by a substantial order backlog. This analyst perspective, drawn from plain-text references to industry reports, bolsters Nvidia’s E-E-A-T credentials in financial transparency.

Overall, the exchange illuminates tensions between investor skepticism and corporate governance in high-growth tech, particularly where AI overlaps with crypto applications. Nvidia’s proactive communication aims to restore confidence, ensuring stakeholders focus on verifiable metrics amid speculative noise.