Over the past weekend, Nvidia distributed a memorandum to Wall Street analysts, vehemently denying any involvement in what is termed 'supplier financing'—a practice where suppliers either invest in or extend loans to their customers. However, this assertion has been met with skepticism from two well-known short-sellers, Jim Chanos and Michael Burry.

Michael Burry highlighted that Nvidia's dealings with entities such as OpenAI and Microsoft have created an intricate web, casting doubt on both the longevity of chip demand and the genuine cost associated with stock dilution. He contended that the mere use of older chips by Nvidia's clientele does not inherently equate to value generation. In fact, he pointed out that older chips are often more power-hungry, which could translate into elevated energy expenses for end-users.

Furthermore, Burry criticized the 'reciprocal dealings' between Nvidia and AI firms, asserting that these arrangements artificially inflate sales figures. He also drew attention to the fact that, despite Nvidia's repurchase of approximately $113 billion worth of its own stock, the total number of outstanding shares has actually risen. This, he argued, points to a substantial hidden cost of dilution.

In its memo, Nvidia systematically refuted each of these points, underscoring the accuracy of its business operations and financial reporting. The company clarified that it does not engage in transactions through special purpose entities, nor does it depend on supplier financing. Additionally, Nvidia emphasized that its strategic investments are relatively modest, with the majority of funds for the companies in its investment portfolio being raised from external sources.

To further bolster its position, Nvidia released robust financial data, aiming to showcase the high quality of its revenue streams. Despite these efforts, however, market skepticism towards Nvidia has not been completely alleviated.