December 17, 2025 • 31 mins
In part one of this week's three-part NVIDIA series, Ed Zitron walks you through why NVIDIA is specifically nothing like Enron, WorldCom or Lucent, and why investors might be thinking that’s the case anyway. Thank you to Ben Cahn of the Ben and Emil show for voicing "NVIDIA" - listen here - https://www.youtube.com/@benandemilshow
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Zone Media.
Speaker 2 (00:05):
Hello, and welcome to this week's Better Offline. I'm ed Zetra. Now.
At the end of November, and Video put out an
internal memo that tried to well get ahead of a
(00:26):
few things, is how I'd put it, that had been
bubbling up in the news, specifically comparisons to Enron, the
massive energy trading giant that imploded in the early two
thousands after well a lot of fraud, also with some
other concerns about its earnings. Said memo was leaked to
Baron's reporter Take Him, who is one of the largest
in video boosters in the known universe. He posts constantly
(00:46):
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,
(01:08):
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
(01:31):
like Enron. Now why did I need to say all
of this? And why did Nvidia need to sell of this?
Speaker 1 (01:36):
Well?
Speaker 2 (01:37):
In Vidio wrote this note as a response to both
short seller Michael Burry, famous of course from The Big
Short and Sound Capitol. There's a whole bunch of other
stuff there, but putting that aside, but also because of
another thing, a guy called Shinaka and Slim Pereira, who
wrote a piece called, and I quote the algorithm that
detected the six hundred and ten billion dollar fraud, how
machine intelligence exposed the AI industry's circular finance scheme. And
(02:00):
I've now been sent this about eleven times maybe more
since it came out.
Speaker 1 (02:04):
Now.
Speaker 2 (02:05):
The reason I'm not going to link to Pereira's piece
in the show notes or in the companion newsletter to
this episode is simple. It's full of bullshit, and I've
had some very good reporters linked to this thing. I've
heard from a lot of people say all this scared me,
and the fact it's scared in video really pissed me
off too, because it's straight up got lies in it,
like made up stuff. I'm not even talking just misstatements.
(02:27):
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
(02:48):
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
(03:11):
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
(03:32):
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
(03:54):
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
(04:18):
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.
(04:41):
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,
(05:02):
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
(05:26):
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,
(05:47):
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,
(06:11):
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.
(06:32):
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
(06:53):
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,
(07:13):
grab your coat, we're going out. Let's forget how all
of this ever happened? What? What?
Speaker 1 (07:17):
What was?
Speaker 2 (07:19):
What was that first?
Speaker 3 (07:20):
Unlike en Run, in Vidia does not use special purpose
entities to hide debt and inflate revenue. In Vidia has
one guarantee for which the maximum exposure is disclosed in
Note nine of eight hundred and sixty million dollars and
is mitigated by four hundred and seventy million dollars in escrow.
The fair value of the guarantee is a crude and
disclosed as having an insignificant value. Nvidia neither controls nor
(07:43):
provides most of the financing for the companies in which
in Vidia invests.
Speaker 2 (07:48):
Oh okay, I'm I wasn't really thinking about all that.
I was literally just I was just saying, how you
were nothing like Enron. We're good. Come on, let's let's go.
Let's the second.
Speaker 3 (07:58):
The article claims that in Video Ever symbols WorldCom but
provides no support for the analogy WorldCom over stated earnings
by capitalizing operating expenses as capital expenditures. We are not
aware of any claims that Nvidia has improperly capitalized operating expenses.
Several commentators alleged that customers have overstated earnings by extending
(08:18):
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.
Speaker 2 (08:41):
Uh okay, I mean I wasn't even thinking about WorldCom.
I wasn't thinking about WorldCom at all. I genuinely hadn't
thought about WorldCom in a while. You're nothing, You're nothing
like them listeners for context. WorldCom was a telecommunications company
that collapsed in the early two thim in part because
it had a tendency of overstating its earnings by billions
(09:04):
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
(09:25):
the company filed for bankruptcy. Hmmm, in video, you you're
not doing anything world commie, are you?
Speaker 1 (09:33):
Why are you bringing up world Com?
Speaker 2 (09:45):
To be clear, by the way, WelCom was doing capital
f fraud, and its CEO, Bernie Ebbers, went to prison
after an internal team of auditors led by WorldCom VP
of Eternal Auditing Cynthia Cooper, reported three point eight billion
dollars in misallocated expres says and phony accounting entries. That
is just straight up fraud. So okay, look, in Video,
(10:08):
you are really specific about saying you didn't capitalize operating expenses,
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
(10:29):
hearing more about Bird.
Speaker 3 (10:30):
Unlike Lucent, in Vidia does not rely on vendor financing
arrangements to grow revenue. In typical vendor financing arrangements, customers
pay for products over years. In Vidia's DSO was fifty
three in Q three. In Video discloses our standard payment terms,
with payment generally due shortly after delivery of products. We
(10:50):
do not disclose any vendor financing arrangements. Our customers are
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.
(11:11):
Even if it did, the amount would be immaterial to revenue.
Speaker 2 (11:18):
All right, Uh, all right, man. If anyone asks whether
you were like famed dot com crashout Loosen Technologies, I'll
be sure to correct them. Oh god, I'm gonna have
to explain another business that failed around the millennium right now,
aren't I? After all, Loosent situation was really different, well
sort of. Loosen was a giant telecommunications company, the one
(11:41):
one that was for a time extremely successful, really really successful,
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
(12:01):
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
(12:24):
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
(12:46):
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
(13:07):
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.
Speaker 1 (13:26):
Okay.
Speaker 2 (13:26):
I hate to say this, but I kind of get
why somebody might say you're doing loos and stuff. After all,
Rumor has it that in your supposed to deal with
open AI, a company that burns billions of dollars a year,
will maybe involve leasing your GPUs to them, which sure
sounds like you're doing vendor finance.
Speaker 3 (13:44):
We do not disclose any vendor financing arrangements.
Speaker 2 (13:48):
Oh all right, Okay, you're not disclosing any vendor financing arrangements. Okay,
I I got it.
Speaker 1 (13:55):
Man.
Speaker 2 (13:57):
Anyway, back to Loosen. Loosen really did fuck up big time, though,
indulging in the dark art of circular vendor financing, the
legs of which and VIDIA has not kind of. In
ninety ninety eight, signed its largest deal, a two billion
dollar deal, an equipment and finance agreement with telecommunications company Windstar,
which promised to bring I shit you not, one hundred
billion dollars in new business over the next five years
(14:18):
and built a giant wireless broadband network along with expanding
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
(14:39):
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
(15:00):
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
(15:20):
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
(15:42):
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.
Speaker 1 (15:51):
We love them.
Speaker 2 (15:54):
A company making about twenty five million dollars a month
twenty five million dollars a month in revenue signed a
two billion dollar loan two billion dollars in financing for
business that would make them one hundred million dollars ass
across five years. They aren't teaching this in business school,
(16:14):
do they? Weirdly, Winstar's Wikipedia page says that revenues were
four hundred and forty five point six million dollars for
the year ending nineteen ninety nine, or around thirty seven
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,
(16:35):
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
(16:59):
be used more aggressive in the future. Windstar can use
the capital. They sure fucking can, can't they?
Speaker 1 (17:05):
Now?
Speaker 2 (17:06):
Another fun thing happened In November two thousand and two,
Lucent would admit it overstated its fourth quarter profits by
improperly recording one hundred and twenty five million dollars in sales,
reducing that quarter as revenue from profitable to break even.
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
(17:28):
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
(17:49):
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
(18:13):
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
(18:33):
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
(18:54):
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
(19:15):
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
(19:36):
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.
(20:00):
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?
Speaker 1 (20:21):
Dude?
Speaker 2 (20:21):
When did you last?
Speaker 1 (20:22):
Slow? Okay?
Speaker 3 (20:23):
So about inventory growth indicating waning demand, People are claiming
that growing inventory in Q three, which was above thirty
two percent quarter over quarter, suggests that demand is weak
and chips are accumulating unsold or customers are accepting delivery
without payment capability, causing inventory to convert to receivables rather
(20:45):
than cash.
Speaker 2 (20:46):
Whoa, whoa, Okay, slow down, slow down? Who's been saying this?
Speaker 1 (20:51):
Oh?
Speaker 2 (20:52):
Everybody? Did Michael Burry scare you? Did you watch the
Big Shorts?
Speaker 1 (20:55):
Say?
Speaker 2 (20:55):
Ah, Christian Bale's playing Pantera again? Eh? Anyway, how you've
woken up everybody else in the house and they're all
wondering why you're talking about receivables. Shouldn't that be fine?
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
(21:17):
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
(21:37):
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.
Speaker 3 (21:46):
First, growing inventory does not necessarily indicate weak demand. In
addition to finished goods, inventory includes significant raw materials in
work in progress. Companies with sophisticated supply chains typically build
inventory in advance of new product launches to avoid stockouts.
In Video's current supply levels are consistent with historical trends
(22:07):
and anticipate strong future growth. Second, growing inventory does not
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.
(22:30):
Payment is due shortly after product delivery. Some customers prepay
in videos. Dso actually decreased sequentially from fifty four days
to fifty three days.
Speaker 2 (22:43):
Nice dude, You're totally right. It's pretty common for companies,
especially large ones, to deliver something before they receive cash
and it happens. I'm being sincere. Sounds like companies are
paying great, but you know, can you just be just
a little more specific, like the whole shipping things before
they're paid things.
Speaker 3 (23:02):
Video recognizes revenue upon shipping a product and deeming collectibility probable.
Speaker 2 (23:07):
Yeah, okay, I thought I heard you out the first time.
What does deeming collectibility probable mean? You could have just
said we get paid like ninety five percent of the
time within two months or whatever, unless it's not like
ninety five or ninety percent. How often? How often are
you paid within two months? Most companies don't break this down,
by the way, But then again, most companies are not
(23:28):
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,
(23:49):
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.
(24:14):
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?
Speaker 1 (24:47):
Hey in video? How are you feeling? Yeah?
Speaker 2 (24:49):
Yeah, you had a rough night. You were saying all
this crazy stuff about Enron. Are you doing okay? No, No,
I get it. You're nothing like Enron. You said a
lot of that last night. So why you were sleeping? Yeah,
you've been asleep sixteen hours. By the way, you were
pretty messed up. You brought up loosent than puked in
my sink and tried to scream at my cat. I
did some digging though, and like, I get it, You're
(25:11):
nothing like Enron. Enron was breaking the law in video
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,
(25:34):
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
(25:55):
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
(26:16):
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.
Speaker 3 (26:32):
Unlike Lucent, in Vidia does not rely on vendor financing
arrangements to grow revenue. In typical vendor financing arrangements, customers
pay for products over years. In Vidio's DSO was fifty
three and Q three. In Vidia discloses our standard payment terms,
with payment generally due shortly after delivery of products. We
do not disclose any vendor financing arrangement. Let me stop
(26:54):
you right there. Let me stop you right there for
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
(27:15):
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.
Speaker 2 (27:26):
Where are those. And also, look you're saying the words
you don't disclose any vendor financing arrangements. Those are the
exact words, though those words are very different to I
do not have any We do not have any vendor
financing arrangement. I do not disclose when I go to
the bathroom, but I absolutely do use the toilet. Let's
(27:47):
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
(28:08):
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?
Speaker 1 (28:18):
Man?
Speaker 2 (28:19):
What do you what are you doing to get Wall
Street what it wants? I'm serious though, seriously, folks, and
thank you Ben for being in Vidia there in video
really isn't like Enron, though, it really isn't. And I
hear a lot of people saying things like, even about
Sam Morman, I wanted this is a brief rent here
(28:42):
saying people are going to go to jail. People are
going to go to prison. There's fraud. There's fraud here,
Core Weave's doing fraud, this, that and the other. None
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,
(29:03):
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,
(29:29):
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.
(29:59):
Thank you for listening to Better Offline.
Speaker 4 (30:00):
The editor and composer of the Better Offline theme song
is Matasowski. You can check out more of his music
and audio projects at Matasowski dot com, M A T
T O S O W s ki dot com. You
can email me at easy at Better Offline dot com,
or visit better Offline dot com to find more podcast
links and of course my newsletter. I also really recommend
(30:22):
you go to chat dot where's youreaed dot at to
visit the discord, and go to our slash Better Offline
to check out our reddit.
Speaker 2 (30:29):
Thank you so much for listening. Better Offline is a
production of cool Zone Media. For more from cool Zone Media,
visit our website cool Zonemedia dot com, or check us
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get your podcasts.
Zone Media.
Speaker 2 (00:05):
Hello, and welcome to this week's Better Offline. I'm ed Zetra. Now.
At the end of November, and Video put out an
internal memo that tried to well get ahead of a
(00:26):
few things, is how I'd put it, that had been
bubbling up in the news, specifically comparisons to Enron, the
massive energy trading giant that imploded in the early two
thousands after well a lot of fraud, also with some
other concerns about its earnings. Said memo was leaked to
Baron's reporter Take Him, who is one of the largest
in video boosters in the known universe. He posts constantly
(00:46):
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,
(01:08):
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
(01:31):
like Enron. Now why did I need to say all
of this? And why did Nvidia need to sell of this?
Speaker 1 (01:36):
Well?
Speaker 2 (01:37):
In Vidio wrote this note as a response to both
short seller Michael Burry, famous of course from The Big
Short and Sound Capitol. There's a whole bunch of other
stuff there, but putting that aside, but also because of
another thing, a guy called Shinaka and Slim Pereira, who
wrote a piece called, and I quote the algorithm that
detected the six hundred and ten billion dollar fraud, how
machine intelligence exposed the AI industry's circular finance scheme. And
(02:00):
I've now been sent this about eleven times maybe more
since it came out.
Speaker 1 (02:04):
Now.
Speaker 2 (02:05):
The reason I'm not going to link to Pereira's piece
in the show notes or in the companion newsletter to
this episode is simple. It's full of bullshit, and I've
had some very good reporters linked to this thing. I've
heard from a lot of people say all this scared me,
and the fact it's scared in video really pissed me
off too, because it's straight up got lies in it,
like made up stuff. I'm not even talking just misstatements.
(02:27):
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
(02:48):
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
(03:11):
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
(03:32):
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
(03:54):
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
(04:18):
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.
(04:41):
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,
(05:02):
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
(05:26):
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,
(05:47):
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,
(06:11):
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.
(06:32):
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
(06:53):
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,
(07:13):
grab your coat, we're going out. Let's forget how all
of this ever happened? What? What?
Speaker 1 (07:17):
What was?
Speaker 2 (07:19):
What was that first?
Speaker 3 (07:20):
Unlike en Run, in Vidia does not use special purpose
entities to hide debt and inflate revenue. In Vidia has
one guarantee for which the maximum exposure is disclosed in
Note nine of eight hundred and sixty million dollars and
is mitigated by four hundred and seventy million dollars in escrow.
The fair value of the guarantee is a crude and
disclosed as having an insignificant value. Nvidia neither controls nor
(07:43):
provides most of the financing for the companies in which
in Vidia invests.
Speaker 2 (07:48):
Oh okay, I'm I wasn't really thinking about all that.
I was literally just I was just saying, how you
were nothing like Enron. We're good. Come on, let's let's go.
Let's the second.
Speaker 3 (07:58):
The article claims that in Video Ever symbols WorldCom but
provides no support for the analogy WorldCom over stated earnings
by capitalizing operating expenses as capital expenditures. We are not
aware of any claims that Nvidia has improperly capitalized operating expenses.
Several commentators alleged that customers have overstated earnings by extending
(08:18):
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.
Speaker 2 (08:41):
Uh okay, I mean I wasn't even thinking about WorldCom.
I wasn't thinking about WorldCom at all. I genuinely hadn't
thought about WorldCom in a while. You're nothing, You're nothing
like them listeners for context. WorldCom was a telecommunications company
that collapsed in the early two thim in part because
it had a tendency of overstating its earnings by billions
(09:04):
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
(09:25):
the company filed for bankruptcy. Hmmm, in video, you you're
not doing anything world commie, are you?
Speaker 1 (09:33):
Why are you bringing up world Com?
Speaker 2 (09:45):
To be clear, by the way, WelCom was doing capital
f fraud, and its CEO, Bernie Ebbers, went to prison
after an internal team of auditors led by WorldCom VP
of Eternal Auditing Cynthia Cooper, reported three point eight billion
dollars in misallocated expres says and phony accounting entries. That
is just straight up fraud. So okay, look, in Video,
(10:08):
you are really specific about saying you didn't capitalize operating expenses,
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
(10:29):
hearing more about Bird.
Speaker 3 (10:30):
Unlike Lucent, in Vidia does not rely on vendor financing
arrangements to grow revenue. In typical vendor financing arrangements, customers
pay for products over years. In Vidia's DSO was fifty
three in Q three. In Video discloses our standard payment terms,
with payment generally due shortly after delivery of products. We
(10:50):
do not disclose any vendor financing arrangements. Our customers are
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.
(11:11):
Even if it did, the amount would be immaterial to revenue.
Speaker 2 (11:18):
All right, Uh, all right, man. If anyone asks whether
you were like famed dot com crashout Loosen Technologies, I'll
be sure to correct them. Oh god, I'm gonna have
to explain another business that failed around the millennium right now,
aren't I? After all, Loosent situation was really different, well
sort of. Loosen was a giant telecommunications company, the one
(11:41):
one that was for a time extremely successful, really really successful,
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
(12:01):
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
(12:24):
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
(12:46):
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
(13:07):
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.
Speaker 1 (13:26):
Okay.
Speaker 2 (13:26):
I hate to say this, but I kind of get
why somebody might say you're doing loos and stuff. After all,
Rumor has it that in your supposed to deal with
open AI, a company that burns billions of dollars a year,
will maybe involve leasing your GPUs to them, which sure
sounds like you're doing vendor finance.
Speaker 3 (13:44):
We do not disclose any vendor financing arrangements.
Speaker 2 (13:48):
Oh all right, Okay, you're not disclosing any vendor financing arrangements. Okay,
I I got it.
Speaker 1 (13:55):
Man.
Speaker 2 (13:57):
Anyway, back to Loosen. Loosen really did fuck up big time, though,
indulging in the dark art of circular vendor financing, the
legs of which and VIDIA has not kind of. In
ninety ninety eight, signed its largest deal, a two billion
dollar deal, an equipment and finance agreement with telecommunications company Windstar,
which promised to bring I shit you not, one hundred
billion dollars in new business over the next five years
(14:18):
and built a giant wireless broadband network along with expanding
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
(14:39):
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
(15:00):
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
(15:20):
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
(15:42):
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.
Speaker 1 (15:51):
We love them.
Speaker 2 (15:54):
A company making about twenty five million dollars a month
twenty five million dollars a month in revenue signed a
two billion dollar loan two billion dollars in financing for
business that would make them one hundred million dollars ass
across five years. They aren't teaching this in business school,
(16:14):
do they? Weirdly, Winstar's Wikipedia page says that revenues were
four hundred and forty five point six million dollars for
the year ending nineteen ninety nine, or around thirty seven
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,
(16:35):
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
(16:59):
be used more aggressive in the future. Windstar can use
the capital. They sure fucking can, can't they?
Speaker 1 (17:05):
Now?
Speaker 2 (17:06):
Another fun thing happened In November two thousand and two,
Lucent would admit it overstated its fourth quarter profits by
improperly recording one hundred and twenty five million dollars in sales,
reducing that quarter as revenue from profitable to break even.
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
(17:28):
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
(17:49):
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
(18:13):
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
(18:33):
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
(18:54):
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
(19:15):
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
(19:36):
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.
(20:00):
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?
Speaker 1 (20:21):
Dude?
Speaker 2 (20:21):
When did you last?
Speaker 1 (20:22):
Slow? Okay?
Speaker 3 (20:23):
So about inventory growth indicating waning demand, People are claiming
that growing inventory in Q three, which was above thirty
two percent quarter over quarter, suggests that demand is weak
and chips are accumulating unsold or customers are accepting delivery
without payment capability, causing inventory to convert to receivables rather
(20:45):
than cash.
Speaker 2 (20:46):
Whoa, whoa, Okay, slow down, slow down? Who's been saying this?
Speaker 1 (20:51):
Oh?
Speaker 2 (20:52):
Everybody? Did Michael Burry scare you? Did you watch the
Big Shorts?
Speaker 1 (20:55):
Say?
Speaker 2 (20:55):
Ah, Christian Bale's playing Pantera again? Eh? Anyway, how you've
woken up everybody else in the house and they're all
wondering why you're talking about receivables. Shouldn't that be fine?
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
(21:17):
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
(21:37):
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.
Speaker 3 (21:46):
First, growing inventory does not necessarily indicate weak demand. In
addition to finished goods, inventory includes significant raw materials in
work in progress. Companies with sophisticated supply chains typically build
inventory in advance of new product launches to avoid stockouts.
In Video's current supply levels are consistent with historical trends
(22:07):
and anticipate strong future growth. Second, growing inventory does not
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.
(22:30):
Payment is due shortly after product delivery. Some customers prepay
in videos. Dso actually decreased sequentially from fifty four days
to fifty three days.
Speaker 2 (22:43):
Nice dude, You're totally right. It's pretty common for companies,
especially large ones, to deliver something before they receive cash
and it happens. I'm being sincere. Sounds like companies are
paying great, but you know, can you just be just
a little more specific, like the whole shipping things before
they're paid things.
Speaker 3 (23:02):
Video recognizes revenue upon shipping a product and deeming collectibility probable.
Speaker 2 (23:07):
Yeah, okay, I thought I heard you out the first time.
What does deeming collectibility probable mean? You could have just
said we get paid like ninety five percent of the
time within two months or whatever, unless it's not like
ninety five or ninety percent. How often? How often are
you paid within two months? Most companies don't break this down,
by the way, But then again, most companies are not
(23:28):
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,
(23:49):
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.
(24:14):
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?
Speaker 1 (24:47):
Hey in video? How are you feeling? Yeah?
Speaker 2 (24:49):
Yeah, you had a rough night. You were saying all
this crazy stuff about Enron. Are you doing okay? No, No,
I get it. You're nothing like Enron. You said a
lot of that last night. So why you were sleeping? Yeah,
you've been asleep sixteen hours. By the way, you were
pretty messed up. You brought up loosent than puked in
my sink and tried to scream at my cat. I
did some digging though, and like, I get it, You're
(25:11):
nothing like Enron. Enron was breaking the law in video
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,
(25:34):
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
(25:55):
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
(26:16):
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.
Speaker 3 (26:32):
Unlike Lucent, in Vidia does not rely on vendor financing
arrangements to grow revenue. In typical vendor financing arrangements, customers
pay for products over years. In Vidio's DSO was fifty
three and Q three. In Vidia discloses our standard payment terms,
with payment generally due shortly after delivery of products. We
do not disclose any vendor financing arrangement. Let me stop
(26:54):
you right there. Let me stop you right there for
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
(27:15):
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.
Speaker 2 (27:26):
Where are those. And also, look you're saying the words
you don't disclose any vendor financing arrangements. Those are the
exact words, though those words are very different to I
do not have any We do not have any vendor
financing arrangement. I do not disclose when I go to
the bathroom, but I absolutely do use the toilet. Let's
(27:47):
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
(28:08):
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?
Speaker 1 (28:18):
Man?
Speaker 2 (28:19):
What do you what are you doing to get Wall
Street what it wants? I'm serious though, seriously, folks, and
thank you Ben for being in Vidia there in video
really isn't like Enron, though, it really isn't. And I
hear a lot of people saying things like, even about
Sam Morman, I wanted this is a brief rent here
(28:42):
saying people are going to go to jail. People are
going to go to prison. There's fraud. There's fraud here,
Core Weave's doing fraud, this, that and the other. None
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,
(29:03):
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,
(29:29):
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.
(29:59):
Thank you for listening to Better Offline.
Speaker 4 (30:00):
The editor and composer of the Better Offline theme song
is Matasowski. You can check out more of his music
and audio projects at Matasowski dot com, M A T
T O S O W s ki dot com. You
can email me at easy at Better Offline dot com,
or visit better Offline dot com to find more podcast
links and of course my newsletter. I also really recommend
(30:22):
you go to chat dot where's youreaed dot at to
visit the discord, and go to our slash Better Offline
to check out our reddit.
Speaker 2 (30:29):
Thank you so much for listening. Better Offline is a
production of cool Zone Media. For more from cool Zone Media,
visit our website cool Zonemedia dot com, or check us
out on the iHeartRadio app, Apple Podcasts, or wherever you
get your podcasts.
Host
Ed Zitron
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