According to multiple media reports, Nvidia issued a rare seven-page memo to Wall Street analysts last weekend, directly denying accusations of fraud in its accounting treatment and refuting questions about the formation of a bubble in artificial intelligence investment. The incident stems from recent public accusations by "Big Short" Michael Burry and a widely circulated article on social media alleging that Nvidia may be involved in "the largest accounting fraud in the history of technology."
When the valuation of AI was questioned, Nvidia chose a rare positive response. The memo provides a point-by-point rebuttal of Burry's calculation of the diluted value of stock-based compensation. Burry previously claimed that Nvidia's stock compensation eroded 50% of shareholder returns. Nvidia responded that the company had repurchased $91 billion since 2018, and that Burry's alleged $112.5 billion mistakenly included employee restricted stock (RSU) taxes in the repurchases. NVIDIA emphasizes that employee equity incentives and buybacks should be distinguished.
In response to the more serious accusations of fraud online, the company has made it clear that it is completely different from the major financial fraud cases in history. The memo stated: "Nvidia's business fundamentals are sound, its financial disclosures are transparent and complete, and the company attaches great importance to its reputation for integrity. Unlike Enron, Nvidia does not use special purpose entities to hide debt or inflate revenue."
Burry later responded on the social platform
The memo also addresses concerns about so-called "circular financing," in which Nvidia invests in artificial intelligence companies that then buy Nvidia's chips. Critics point to Nvidia's September announcement of a $100 billion investment in OpenAI and its recent $10 billion investment in Anthropic as examples of the company effectively funding its own sales.
NVIDIA responded that such strategic investments account for a very small proportion of the company's revenue and an even smaller proportion of the approximately US$1 trillion in private capital market financing globally each year, and emphasized that its investment targets mainly sell products to third-party customers rather than relying on NVIDIA.
Although the company reported record revenue of $57 billion in its latest quarter, a year-on-year increase of 62%, Nvidia's stock price remains volatile. CEO Huang Renxun said in an internal meeting that the company is in a situation where "nothing is right": "If the quarterly data is not good, it is evidence that the AI bubble has burst; if it is good, we are fueling the bubble."