Nvidia pushed out a long memo to analysts after Michael Burry began saying the company was tied to fraud claims connected to a piece titled “The Algorithm That Detected a $610B Fraud,” and the memo came out after Raymond James shared it with clients.
Nvidia said Michael’s claims twist how its business works, how its filings should be read, and how money moves through the current AI cycle.
Nvidia said the attempts to link its activity to old accounting blowups do not match reality. It said it does not use special‑purpose vehicles, does not use vendor financing, and has one guarantee in its filings with a value so tiny that it does not change its results.
Nvidia said its payment terms are steady, with days sales outstanding at 53, the same range it has reported for years.
The company pushed back at the idea that any kind of $610 billion circular‑financing loop exists. It said its strategic investments were about $3.7 billion in the third quarter and around $4.7 billion year‑to‑date, and that these amounts are small when measured against its revenue and the entire pool of private capital worldwide.
Nvidia disputes claims of circular cash flows and depreciation gaps
Nvidia told analysts that the outside companies in its portfolio mainly raise third‑party funds, not recycled capital.
This memo followed weeks of warnings from Michael Burry, who said large tech companies might be reporting lower depreciation than they should on AI hardware.
In a post on X, Michael said hyperscalers extended useful‑life assumptions in a way that “artificially boosts earnings — one of the more common frauds of the modern era.” He also said “massively ramping capex through purchase of Nvidia chips/servers on a 2‑3 yr product cycle should not result in the extension of useful lives of compute equipment.”
Michael estimated that depreciation might be understated by $176 billion from 2026 to 2028 across the entire industry. He said companies like Oracle and Meta might show earnings that are more than 20% higher than what real depreciation should allow at the end of the decade.
He also reported large put‑option positions as of Sept. 30 tied to AI names, including positions linked to Nvidia and Palantir Technologies.
Nvidia answers questions on cash flow, margins, and risk
Nvidia used the memo to defend how it reports cash flow and operating costs. It said it produced $23.8 billion in operating cash flow and $22.1 billion in free cash flow in the third quarter.
Long‑term free cash flow has been close to 98% of GAAP net income since fiscal 2018. Nvidia said its inventory trend fits normal product ramps and its guidance. The memo also responded to claims tied to margins, depreciation, and regulatory issues.
Nvidia said higher warranty costs this year come from the Blackwell architecture, which requires more complex parts, and that warranty items are logged the right way.
Nvidia said bad‑debt expense is tiny and is placed in general and administrative expenses. It said it is not aware of any SEC probes and that crypto volatility does not affect its accounting.
The memo also said the claims about insider selling confuse actions made by third‑party funds, not Nvidia insiders.
Raymond James analyst Simon Leopold reacted to the memo and said the “narrative of systemic fraud is inconsistent with NVIDIA’s fundamentals and the structure of this investment cycle.”
After mentioning Nvidia’s software stack, system lineup, and yearly platform rhythm, Simon said “NVIDIA has an obligation to employ its cash in the best interest of shareholders; we view its investments in AI related opportunities as appropriate.”
Simon said he still sees scale and visibility through peak Blackwell shipments in 2026, supported by Nvidia’s supposed “large order book.”
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