Part One: NVIDIA Isn't Enron - So What Is It?

in video boosters in the known universe. He posts constantly about how Invidio is going to be the biggest, most hugess company in the world. He's meant to be like an analyst and a reporter, but he mostly just seems like a cheerleader and it's kind of embarrassing. Now, nevertheless, he was leaking a memo that was quite worrisome, so oh no, and Vidio chose to disseminate it through him, but also to short sellers. The actual providence of this,

or is it providence? I don't know, but someone will correct me is kind of confusing anyway, long story short, people have a few concerns about in Nvidia, and well you shouldn't. Though, you shouldn't have any concerns at all, because in video's very secret, not to be leaked immediately. Document spent thousands of words very specifically explaining how in video was fine, and most importantly, by the way, nothing like Enron. Now why did I need to say all

of this? And why did Nvidia need to sell of this?

machine intelligence exposed the AI industry's circular finance scheme. And I've now been sent this about eleven times maybe more since it came out.

I'm talking about really specific things. It's made up. For example, in one part, Perera talks about major semiconductor distributor Arrow Electronics stating things and it's Q three twenty twenty five earnings about in video. Let me be fucking clear about this. Really pissed me off. Arrow makes no statements of any kind about in video on its earnings calls, in its ten Q or its earnings presentation. You can go and look.

He doesn't link to anything. By the way, and if you need another example, Prera claims that when in Vidia launched the Hopper H one hundred architecture in Q two fiscal twenty twenty three, also amid reported supply constraints in strong demand, inventory declined eighteen percent quarter of a quarter as the company fulfilled backloged orders. If you bothered to go and look at a videa's inventory from that period, which is public. By the way, you can see that

inventory increase. Now, I'm not pissed off at anyone listening to this. I'm pissed off at any financial media that gave this any kind of attention. And I'm kind of pissed off at in Video for doing it too. It's aislop and I've not heard of Brera before, but as LinkedIn says, he is, and I'm not shitting you. The CEO at pet Express Sri Lanka, I would suggest getting your financial advice elsewhere and at a minimum, making sure

that you read out lets that actually source their data. Anyway, as you're probably working out, all of this is fine and normal. This happens normally all the time. Companies do this all the time, especially successful ones. And there's nothing to be worried about here, because after reading all seven pages of this document, we can all read that Invidia is nothing like Enron. No really though, in Video is

nothing like Enron. And it's kind of weird that anyone, especially you, by the way, as saying that Enron and Nvidia have any similarities at all. They just put out a very long document, by the way, and it says they're not Enron. Why do you keep asking about Enron.

All right, why are you being weird? Okay, Now, in Vidia said something about Enron, but that's because fools and vagabonds keep suggesting that in Video was like Enron, and very normally in Vidia has decided thousands of words at a time to set the records straight, and I genuinely no jokes do agree in Vidia is nothing like Enron.

Putting aside how I might feel about the ethics or underlying economics of Generative AI, in Vidia is an incredibly successful business that has incredible profits, holds an effective monopoly on Kouda, which powers the underlying software layer to running software on GPUs, specifically Generative AI, and not really much

else that has any kind of revenue potential. Now talked a bit about Cooder and the Hater's Guide to in Video, which I've linked to in the show notes, And yes, while I believe that one day this will all be seen as one of the most egregious wastes of capital of all time, for the time being, Jensen Huang is

potentially the greatest salesperson of all time. Nevertheless, people have somewhat run away with the idea that Invidia is Enron, in part because of the weird circular deals in videos built with NEO clouds, dedicated AI focused cloud companies like cor We've, Lambda and Nebius, who run data centers full of GPUs sold by a video, which they then use as collateral for loans to buy more GPUs from in video.

I can see why people are a little concerned. But as dodgy and weird and unsustainable as this all is, it isn't illegal in it certainly isn't Enron because in video, as I've been trying to tell you, is nothing like Enron. Now you may be a little confused. I get it that Invidia is bringing up Enron at all. Nobody seriously thought that in video was like Enron, not even the psygonomous and analyst just Daurio, who has been questioning its

accounting practices for years. Because Enron was genuinely one of the largest criminal enterprises in history, and Nvidia is, at worst, I believe, a bit dodgy and doing whatever it can to survive through various forms of accountancy alchemy. Wait, wait, you still think in Vidia is Enron? What's it going to take to convince you? I just told you that in Vidia isn't Enron. In video itself has explained at length as I'll explain by the way, it's not Enron.

And I'm not sure why you keep bringing up Enron all the time. Stop being an asshole. Enron and in Vidia are nothing alike. Look. Look, in Vidia's own memo said that, and I quote in Nvidia does not resemble historical accounting frauds because in Vidia's underlying business is economically sound, its reporting is complete and transparent, and it cares about its reputation for integrity. Now I know what you're thinking.

Why is the largest company on the stock market having to reassure us about its underlying business economics and reporting. One might immediately begin to think strives out effects style, that there there might be something up with in Vidia's underlying business. But nevertheless, you know what, fuck it in Vidio, grab your coat, we're going out. Let's forget how all of this ever happened? What? What?

GPU depreciation schedules beyond economic useful life. Rebutting this claim, some companies have increased useful life estimates to reflect the fact that GPUs remain useful and profitable for longer than originally anticipated, in many cases, for six years or more. We provide additional context on the depreciation topic below.

and billions of dollars in total eleven billion dollars. This followed a failed merger with Sprint, which was blocked for antitrust reasons, essentially forcing the company to grow its stock through customers rather than mergers. You know, normal way. Kind of, the telecom sector was pretty saturated back there, making this a pretty tall ask, and so we ended up with a bunch of dodgy accounting, which all fell apart when

the company filed for bankruptcy. Hmmm, in video, you you're not doing anything world commie, are you?

capital expenditures. You're not doing that. That's that's great, great stuff. I literally never thought you'd done that before. I genuinely agree. You have nothing like WELLcom in VideA, nothing like Wollcom anyway. Glad to hear about the depreciation stuff. Looking forward to hearing more about Bird.

subject to strict credit evaluation to ensure collectibility. In Video would disclose any receivable longer than one year in long term other assets. The six hundred and twenty three million. Other balance as of Q three does not include extended receivables. Even if it did, the amount would be immaterial to revenue.

in fact, turned around by the now infamous Carli Fiorina. Furina, who joined Loocent from AT and T, had a strong start, and in her first few years at the company before she left join the HP, Loosen saw revenues grow by fifty eight percent to thirty eight billion dollars and their income grow from a small loss to a four point eight billion dollar profit. In video, this all sounds great. Why wouldn't you want to be compared to Oh? Oh yeah, yeah, sorry,

you see. In nineteen ninety seven, Farina took over the group responsible for selling geared to telecoms providers, and within one year, that business unit grew by just shy of a quarter. In two years, it had jumped from fifteen point seven billion dollars when Furina took over to twenty three point six billion dollars in nineteen ninety nine. Lucent did this by lending money to its customers, with its

loans appearing on its balance sheets. As quoting CNN here an allegedly sold assem now Lucient was classifying debt as nasse and did something called vendor financing, which means you lend somebody money to buy something from you. It turns out Loosen did a lot of this, and in a very simple way. This is like giving someone a ten dollar loan to buy ten dollars of bricks from you. It's just handing the same ten dollars back and no

one's really doing well here. Look. These loans were also very generous with Telco's small fledgling telecommunications companies with minimal assets and revenue by the way, and often mountains of high interest. They're often paying nothing up from the loans themselves were often bigger than the company itself and far beyond what the company could hope to repay. Okay and Video look we're we're friends.

Windstar's optical networking I quote the Wall Street Journal. Windstar was one of the scores of standalone startup companies created in the late nineteen nineties to compete in the market for local telecom services. These firms, known as competitive Local Exchange Carriers or clacs, raised billions of dollars in debt and equity financing and embarked upon ambitious plans to compete with incumbent carriers. For a time in the late nineties,

their stocks were hot properties, outpacing even Internet stocks. In December ninety ninety nine, Wyatt would say that Windstar's small white dish antennas heralded a new era and new mindset in telecommunications and included this awesome quote about Loosen from CEO and founder Will Ruhanna. On one level, we're a customer and they are a supplier. On another level, they're

a financier and we are a borrower. On yet another level, they are providing services around the world to accelerate our development. They also want to use our service and have guaranteed one hundred million dollars in business. Hell yeah, I also love this because you can read this or hear this or what have you, and go and read current magazines talking about these companies and see them do the same things. Just look, Oh my god, there is actually another great

coat I might want to share with you. Windstar is a publicly traded company and has more than four thousand employees and reports more than three hundred million dollars in annual highed coore revenues. We love annualized revenues, double, folks, we love them. Just do month times to where you get the biggest numbers we've ever seen. They're beautiful.

point one million dollars a month. These numbers don't line up so good, and probably because Windstar was kind of crooked. Now, WinStar, they loved raising money. Two years later, in November two thousand, it would raise one point oh two billion dollars for example, and it raised the remarkable five point six billion dollars between February ninety ninety nine and July two thousand and one.

According to The Wall Street Journal, nine hundred million dollars of that came in December nineteen ninety nine for an investment from a bunch of investors, including, of course, Microsoft, with analyst Greg Miller of Jeffreys and Co. Saying the Microsoft investment is a significant endorsement that the technology will be used more aggressive in the future. Windstar can use the capital. They sure fucking can, can't they?

Things would eventually collapse when Windstar couldn't pay its debts, filing for Chapter eleven bankruptcy protection on April eighteenth, two thousand and one, after failing to pay seventy five million dollars in interest payments to Loosen, which had cut access to the remaining four hundred dollars million dollars not four hundred dollars four hundred million dollars of its one billion

dollar loan to Windstar. As a result, Windstar would file a ten billion dollar law soon in bankruptcy court in Delaware the very same day, claiming that Lucent breached its contract and forced Windstar into bankruptcy by well not offering to give it more money that it would not pay off. Elsewhere,

things had begun to unravel for Loosened. A January two thousand and one story from The New York Times stopped the strange story of Lucent, a company that made up over thirty three billion dollars in revenue in its previous fiscal year, asking to defer the final trance of payment twenty million dollars for an acquisition due to and I quote accounting and financial reporting considerations. Now why would they

do that? Well, Lucent needed to keep that money on the books to boost its earnings as its stock was in the toilet and was about to announce it was laying off ten thousand people and a quarterly loss of

over a billion dollars. Over the course of the next few years, Lusent would sell off various entities, and by the end of September two thousand and five, it would have thirty thousand, five hundred staff and a stock price of two dollars in ninety nine cents, down from a high of seventy five bucks a share at the edge of nineteen ninety nine and one hundred and fifty seven thousand employees. According to VC Thomas Tunger's and that is his name, Luson had eight point one billion dollars of

vendor financing deals. At its high, Lusent was still a real company selling real things, but it had massively over extended itself in an attempt to meet demand that didn't really exist. And when Lucent realized that it was, how did Degree demand itself to please the markets? To quote MIT Tech review and author Lisa Endlich, it believed that setting and meeting the expectations of Wall Street subsumed all other goals, and that Lucent had little choice but to

ride the wave. To be clear, in Vidia is quite different from Lusam. He has plenty of money in the circular deals it does with Corweve and Lambda don't involve the same levels of risk. In Vidia is not, to my knowledge, backstopping Corwy's business or providing it with loans. Though in Vidia had agreed to buy six point three billion dollars of computers the buyer of last resort of any unsold capacity, and did mention an unnamed partner it had agreed to backstop the leases of in its most

recent earnings. Nevertheless, Nvidia can afford this, and it isn't illegal. Though it is obviously propping up a company with flagging demand. Nvidia doesn't appear to be taking on masses of debt to find its empire either, with other fifty six billion dollars in cash on hand and a mere eight point four billion dollars in long term debt. Okay, we got there. This man and video is nothing like Loosen either. Okay, maybe there are some similarities, but it's different. No worries

at all. I know I'm chill, I'm relaxed, and I'm most importantly normal. You still seem nervous in video. I promise you. If anyone asks me if you're like Loosen, I'll tell him you're not. I'll be sure to tell him You're nothing like Lucien. Are you okay?

In video is a big business. Your business is pretty big, man, And it's totally reasonable to believe that a company planning to sell sixty three billion dollars of GPUs in the next quarter would have ballooning receivables thirty three billion dollars in receivables up from twenty seven billion dollars last quarter. A growing inventory nineteen point seven eight billion dollars up from fourteen point nine six billion dollars in the last quarter.

That is that is pretty big up. But nevertheless, in video's a big asset, heavy business, which means in videos, clients likely get decent payment terms to raise their or move cash around to get them paid. Okay, everyone, calm down. You can go back to bed like my buddy, who is nothing like Enron by the way, just said.

indicate customers are accepting delivery without payment. Capability in video recognizes revenue upon shipping a product and deeming collectibility probable. The shipping reduces inventory, which is not related to customer payments. Our customers are subject to strict credit evaluation to ensure collectibility. Payment is due shortly after product delivery. Some customers prepay in videos. Dso actually decreased sequentially from fifty four days to fifty three days.

in Video the largest company on the stock market. If I'm honest, nobody else has recently had to put anything out that says I'm not Enron, And I want to be clear that in Vidia is not like Enron for real, though it really isn't like Enron, and jokes aside, bits aside, there were very different businesses. They were very different. Indeed, is it is very strange though that in Video wants

somebody to think about how it's nothing like Enron. This was technically an internal memo, and thus there is a chance its existence was built for only nvidians or short sellers or something worried about the value of the stock. And we know it's definitely written to try and deflect Michael Burry's criticism, as well as a random AI slap substacker. It's just weird. It's weird. I don't really know what's going on, and I really want to know. Why does

nvidio need you to know? It's nothing like Enron did do something like Enron? Is there a chance that you or I may mistakenly say, hey, is in Vidio doing Enron?

is definitely not doing that. But you said you didn't use special purpose vehicles recently you did though you are, You're not using them like Enron. Enron moved the debt around on the SPVs. But you're investing two billion dollars in in Elon Musks special purpose vehicle that will then use that money to raise debt to buy GPUs from you, from you and video that would then be rented to Elon Musk. And this is very different to what Enron did. I am with you, dude. Don't let the haters keep

you down. No, I I don't think a T shirt that says in video is not like Enron for these specific reasons will help you either. Wait wait, okay, look one thing, though, you have this theoretical deal lined up with Sam Mortman to invest one hundred billion dollars in the open AI. And yes, you said in your latest that it was actually a letter of intent with the opportunity to invest, which doesn't mean anything, got it. And the plan was you would lease the GPU's two open

AI if the deal happens. Now, theoretically, how would you go about doing that in video? You'd probably need to do exactly the same deal you did with Xai. You would you would buy the GPUs from yourself and then rent them to open Ai. That's that's a little loosened to you. Kind of sounds like vendor financing. And oh you mentioned that rook man.

a second. You were on about this last night, and you scared my cats from you're crying about something called two nanimeter. I don't know. First of all, why are you bringing up specifically typical vendor financing agreements? Do you have atypical ones? Also, I'm jazzed. I guess i'd say to hear you disclose your standard payment terms. But what standard payment terms? What exactly where can I find those? By the way, because you didn't link them, you didn't didn't mention them.

the bathroom, but I absolutely do use the toilet. Let's not pretend that Nvidio doesn't have a history in helping getting its business buddies funding and Video has deals with both Lambda and Core weave to guarantee that they will have compute revenue, which they in turn used to raise debt, which is then used to buy more in Vidio GPUs, you've learned how to feed the day into yourself in video.

I'm genuinely impressed. This is great stuff. I'm having the time of my life with how not like Enron you are. And I'm serious that I one hundred percent do not believe you are like Enron. But what exactly you doing?

of these companies are doing fraud. That's the world we live in. They are doing accountancy, alchemy, They're moving stuff around, they are There are ways that in Vidia could be doing all of this, and I'm very sure that the case perfectly legally. Sam Orban not breaking the law either, assuming he's been honest with his investors. Nevertheless, for real, though, Invidia is nothing like Enron. Enron was a criminal enterprise,

and Nvidia is not. More than likely in video is doing relatively boring vendor financing stuff and getting people to pay them on fifty to sixty day time scales, probably net sixty and like it said, it gets paid up front sometimes. In Video truly isn't like Enron. After all, Meta, Microsoft and Apple are the ones getting into energy trading.

To the point that I actually think it's time that someone explained what exactly happened to Enron with a more modern twist, or at least as much as it's possible within the confines of a podcast that isn't exclusively about Enron. But I'm going to explain next episode what the fuck Enron was and you can have some fun listening to it. Thank you for listening to Better Offline.