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Investing.com -- Nvidia has issued a detailed memo to analysts pushing back against fraud-related claims tied to short-seller Michael Burry and the article “The Algorithm That Detected a $610B Fraud,” according to broker Raymond James.
The company addressed each allegation directly, arguing that the claims mischaracterize its business practices, financial disclosures and the dynamics of the current AI investment cycle.
The memo rejects comparisons to past accounting scandals, stressing that Nvidia does not use special-purpose vehicles (SPV), does not rely on vendor financing, and has only a single disclosed guarantee with immaterial fair value.
Payment terms remain tight, with days sales outstanding at 53 — broadly aligned with the company’s average over the past several years.
Nvidia also said the widely circulated accusation of “$610 billion” in circular financing is unfounded, stressing that its strategic investments totaled around $3.7 billion in the third quarter and roughly $4.7 billion year-to-date, a small slice of its revenue base and a fraction of global private capital.
The company also emphasized that portfolio companies mainly raise third-party funds.
The pushback comes weeks after Burry, made famous by “The Big Short,” warned that large technology companies may be understating depreciation expenses tied to AI infrastructure.
In a recent post on X, he argued that hyperscalers have extended estimated useful life assumptions in a way that “artificially boosts earnings — one of the more common frauds of the modern era.”
He said that “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.”
Burry estimated that depreciation could be understated by roughly $176 billion across the industry from 2026 to 2028 and suggested that profits at companies such as Oracle and Meta could be overstated by more than 20% later this decade.
He also disclosed large put-option positions against several AI-linked stocks as of Sept. 30, including wagers tied to Nvidia and Palantir Technologies.
Nvidia, for its part, defended its accounting and operational practices. The AI darling pointed to strong cash conversion as evidence of healthy revenue quality, reporting $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 run at roughly 98% of GAAP net income since fiscal 2018. Inventory trends, the company said, reflect normal product ramps and forward guidance.
The memo also countered claims around margins, depreciation and regulatory risk. Nvidia told analysts that higher warranty costs this year reflect the complexity of the Blackwell architecture and are properly accounted for, while bad-debt expense is negligible and sits in general and administrative expenses.
It added that it is not aware of any SEC probes and that crypto price moves are irrelevant to its accounting. Allegations about insider selling, it said, misinterpret activity from third-party funds.
Commenting on the memo, Raymond James analyst Simon Leopold wrote that the “narrative of systemic fraud is inconsistent with NVIDIA’s fundamentals and the structure of this investment cycle,” citing the company’s software moat, full-stack systems and one-year platform cadence.
"NVIDIA has an obligation to employ its cash in the best interest of shareholders; we view its investments in AI related opportunities as appropriate," he said.
The analyst continues to see scale and visibility through peak Blackwell shipments in 2026, supported by a large order book, though he highlighted power constraints, product-ramp complexity and potential hyperscaler capex slowdowns as the central risks to monitor.