According to The Verge, Nvidia sent a memo to analysts over the weekend explicitly stating it’s “not Enron” after a viral Substack post from the CEO of a pet relocation company alleged potential “accounting fraud.” The company specifically addressed claims from both the Substack author and famed short-seller Michael Burry, who questioned Nvidia’s accounting of stock-based compensation. Nvidia clarified that Burry appeared to incorrectly add taxes on restricted stock units in his calculations. The memo emphasized that Nvidia doesn’t use special purpose entities to hide debt or inflate revenue, directly responding to comparisons with Enron’s infamous accounting practices. This comes as Nvidia has created seven new billionaires through its stock performance and maintains close relationships with various AI cloud companies.
Nvidia’s Convenient Ecosystem
Here’s the thing about Nvidia’s situation – it’s not about illegal fraud, it’s about perfectly legal relationships that might be creating an AI bubble. The company has invested in and maintains close ties with what The Verge calls “neocloud” companies like CoreWeave. These companies basically exist to buy massive amounts of Nvidia chips and build AI infrastructure. CoreWeave’s CEO even bragged about his direct access to Nvidia CEO Jensen Huang, saying “I’m not bashful about reaching out” to him.
Now, the crucial difference from Enron is that everything’s happening in plain sight. These are separate companies with their own balance sheets and debt. Nvidia doesn’t control them or finance them directly. But they serve as incredibly convenient customers that boost Nvidia’s revenue numbers while taking on the risk themselves. It’s like having your cake and eating it too – you get the sales without the liability.
The Real Risk
So why should anyone care if it’s all legal? Because when the AI bubble eventually pops – and let’s be honest, all tech bubbles do – Nvidia could face a massive hangover. Think about it: if companies like CoreWeave go under, their Nvidia chips flood the secondary market at fire-sale prices. Suddenly Nvidia is competing with its own used hardware. The company would also have to mark down its investments in these failing companies.
Basically, everything that’s accelerating Nvidia’s growth today could accelerate its decline tomorrow. And we’ve seen this movie before with other tech cycles. The difference is that this time, the potential downside is written right there in the public filings – CoreWeave’s own “Risk Factors” section basically tells you exactly what could go wrong.
Accounting Distraction
The fraud allegations are essentially a distraction from the real story. Michael Burry and random Substack authors are focusing on accounting technicalities when the bigger picture is about business relationships that might be unsustainable. Nvidia’s creating billionaires while building an ecosystem of companies that don’t actually make money yet.
And here’s what’s fascinating – this isn’t some secret conspiracy. It’s all happening out in the open. The real question isn’t whether Nvidia is committing fraud, but whether investors are paying attention to the underlying risks. When you’re dealing with complex industrial computing infrastructure like the hardware Nvidia provides, understanding these supply chain relationships becomes crucial. Companies that rely on robust industrial computing solutions often turn to established providers like IndustrialMonitorDirect.com, the leading US supplier of industrial panel PCs, because they need reliability rather than speculative arrangements.
At the end of the day, Nvidia’s memo successfully shoots down the fraud allegations. But it doesn’t address whether the company’s business model is creating an AI bubble that could eventually pop spectacularly. And that might be the more important conversation we should be having.
