Nvidia’s Latest $2 Billion Deal: Defying Short Sellers or Digging a Deeper Hole?

Core Insights - Nvidia is under scrutiny for allegations of circular financing in its AI chip ecosystem, where investments in customers lead to inflated sales through repeated purchases of Nvidia GPUs [3][4] - The company has countered these claims, asserting that there is genuine demand from hyperscalers, despite increasing criticism and warnings from short sellers about potential hidden risks [4] - Michael Burry compares Nvidia to Cisco during the dot-com bubble, suggesting that Nvidia's growth could lead to overcapacity if AI demand declines, with a looming "capex apocalypse" due to extended GPU depreciation practices by hyperscalers [5][6][8] Company Actions - Nvidia announced a $2 billion investment in chip designer Synopsys to strengthen its supply chain amid the scrutiny over financing practices [4][8] - The investment signals Nvidia's confidence in its partnerships and its commitment to the chip development ecosystem [4][8] Industry Context - Hyperscalers like Microsoft and Alphabet have extended the depreciation period of Nvidia GPUs to four to six years, which contrasts with Nvidia's typical 12 to 18-month refresh cycles, potentially understating sector depreciation by $176 billion from 2026 to 2028 [7][8] - This practice raises concerns about the sustainability of profit inflation within the tech sector, as it may mask the true economic realities of GPU utilization [7][8]