Multiple media reports revealed that NVIDIA issued an unusual seven-page memo to Wall Street analysts over the weekend, directly refuting allegations of fraudulent accounting practices and dismissing concerns about an AI investment bubble.
The controversy stemmed from recent public accusations by "Big Short" investor Michael Burry and a widely circulated social media article suggesting NVIDIA might be involved in "the largest accounting fraud in tech history." Amid growing skepticism over AI valuations, NVIDIA chose to respond publicly in a rare move.
The memo systematically countered Burry's claims about stock-based compensation diluting shareholder value. Burry had alleged that NVIDIA's equity incentives eroded 50% of shareholder returns. NVIDIA clarified that since 2018, its share repurchases totaled $91 billion, while Burry's $112.5 billion figure incorrectly included tax expenses related to employee restricted stock units (RSUs). The company emphasized the need to distinguish between employee equity incentives and buybacks.
Addressing more severe online fraud allegations, NVIDIA firmly stated its fundamental differences from historical accounting scandals. The memo asserted: "NVIDIA maintains robust business fundamentals with transparent and complete financial disclosures, valuing integrity above all. Unlike Enron, we've never used special purpose entities to hide debt or inflate revenue."
Burry later responded on platform X, standing by his analysis while clarifying he "never called NVIDIA another Enron, but rather compared it to Cisco," referencing Cisco's 3,800% peak-to-80% crash during the dot-com bubble.
The document also addressed concerns about "circular financing," where NVIDIA invests in AI companies that subsequently purchase its chips. Critics cited NVIDIA's $100 billion commitment to OpenAI in September and recent $10 billion investment in Anthropic as examples of self-funded sales.
NVIDIA countered that such strategic investments represent a minimal portion of revenue and an even smaller fraction of the $1 trillion annual private capital market. It stressed that portfolio companies primarily serve third-party customers rather than depending on NVIDIA.
Despite reporting record quarterly revenue of $57 billion (up 62% YoY), NVIDIA's stock remains volatile. CEO Jensen Huang noted the company faces a "no-win" perception: "Weak quarterly results are seen as proof of an AI bubble bursting, while strong performance gets interpreted as us inflating the bubble."