Core Viewpoint - Ming-Chi Kuo, a notable tech analyst, defends NVIDIA Corporation against allegations of financial misconduct, particularly regarding its Days Sales Outstanding (DSO) and inventory levels, asserting that these metrics are consistent with industry standards and not indicative of fraud [1][2]. Group 1: DSO Analysis - Kuo argues that the increase in DSO is reasonable as receivables are becoming more concentrated among a few large customers, reflecting their bargaining power [3]. - Critics have misjudged NVIDIA's DSO by comparing it to inappropriate peer groups; when compared to suppliers serving the same cloud service providers, which typically have DSOs exceeding 60-70 days, NVIDIA's figures are more aligned [4]. Group 2: Inventory Examination - Kuo addresses concerns regarding a 32% quarter-over-quarter increase in inventory for Q3 FY26, clarifying that NVIDIA's Q2 FY23 inventory had actually risen by approximately 23% QoQ, not declined [5]. - The recent inventory surge is attributed to a significant ramp-up in upstream capacity at TSMC, particularly linked to the mass production of the new Blackwell B300 GPU, indicating preparation for strong demand rather than fraudulent activity [5]. Group 3: Criticism Context - Kuo's defense comes amid scrutiny of NVIDIA's financial practices, with independent researcher Shanaka Anslem Perera highlighting potential red flags, including an 89% increase in accounts receivable, extended payment cycles, and weaker cash conversion compared to peers [6].

Days Sales Outstanding (DSO) Analysis - Critics argue Nvidia's DSO increase from an average of 46 days in FY2020-2024 to 53 days in Q3 FY26 indicates financial irregularities [1] - The increase in DSO is reasonable due to accounts receivable concentration, with major customers' share rising from 238% in FY2020-2024 to 65% in Q3 FY26 [2] - Cloud service providers (CSPs) have significant bargaining power, leading to longer payment terms and influencing DSO [3] - Comparing Nvidia's DSO to suppliers with similar CSP customers, such as Arista, Celestica, and Vertiv (whose DSOs typically run above 60-70 days), makes Nvidia's 53-day DSO appear reasonable [3] Inventory Analysis - Critics describe the 32% QoQ increase in Nvidia's Q3 FY26 inventory as a "paradox," citing Q2 FY23 as a counterexample [3] - Q2 FY23 inventory increased by roughly 23% QoQ to USD 3889 billion, contradicting the claim of an 18% decline [4] - The 32% increase in Q3 FY26 inventory aligns with the ramp in upstream capacity, as TSMC's CoWoS average monthly output grew by roughly 25-30% QoQ to around 60 thousand wafers per month (kwpm) in 3Q25 [5] - Work-in-Process (WIP) represented 442% of Nvidia's total inventory in Q3 FY26, surging about 98% QoQ to USD 8735 billion, reflecting the ramp and mass production of the new Blackwell B300 GPU [5]

Days Sales Outstanding (DSO) Analysis - Critics argue Nvidia's DSO increase from an average of 46 days in FY2020-2024 to 53 days in Q3 FY26 indicates financial irregularities [1] - The increase in DSO is reasonable due to a shift in accounts receivable concentration, with major customers accounting for 65% in Q3 FY26, up from an average of 238% in FY2020-2024 [2] - Cloud service providers (CSPs) have significant bargaining power and historically operate with longer payment terms, justifying the rise in DSO [3] - Nvidia's 53-day DSO is reasonable when compared to suppliers like Arista, Celestica, and Vertiv, whose DSOs typically exceed 60-70 days [3] Inventory Analysis - Critics describe the 32% QoQ increase in Nvidia's Q3 FY26 inventory as a "paradox" [3] - Q2 FY23 inventory increased by roughly 23% QoQ to USD 3889 billion, contradicting claims of a decline [4] - The 32% increase in Q3 FY26 inventory aligns with the ramp in upstream capacity, with TSMC's CoWoS average monthly output growing by roughly 25-30% QoQ to around 60kwpm [5] - Work-in-Process (WIP) represented 442% of Nvidia's total inventory in Q3 FY26, surging about 98% QoQ to USD 8735 billion, reflecting the ramp and mass production of the new Blackwell B300 GPU [5]