Chanos Sounds Alarm on Nvidia’s Financing Practices, Drawing Parallels to Enron and Lucent

Short-seller Jim Chanos has flagged concerning financing patterns at Nvidia, comparing the chipmaker's business practices to those of Enron and Lucent during their infamous collapses. The critique centers on allegations of circular financing arrangements where Nvidia allegedly funds cash-burning customers to maintain chip demand.

Nvidia vehemently denies using vendor financing, issuing a seven-page rebuttal to analysts. The company maintains its financials are transparent, with customers paying within 53 days of purchases. However, scrutiny intensifies as Nvidia's investments in AI startups like OpenAI and xAI—all major clients—raise questions about demand sustainability.

The shadow of dot-com era accounting scandals looms large. Lucent's collapse involved similar customer financing schemes before writing off billions when the bubble burst. Chanos, who famously predicted Enron's downfall, suggests history may be repeating: "They're putting money into money-losing companies in order for those companies to order their chips."