Nvidia Says it Isn't Using 'Circular Financing' Schemes. 2 Famous Short Sellers Disagree

Stocks

Summary:

The biggest tech companies are spending billions in a rush to build AI data centers ahead of demand.

Nvidia (NVDA) sent a memo to Wall Street analysts over the weekend arguing that it is not engaged in vendor financing, a controversial practice in which suppliers invest in or extend loans to their own customers.

Famed short sellers Jim Chanos and Michael Burry aren't so sure.

Nvidia wrote a seven-page document — first reported by Barron's on Tuesday morning — rebuffing claims that it invests in its own customers to inflate its revenue. The memo was written in response to a newsletter from a little-known Substack author last week claiming that the $5 trillion AI chipmaker is engaged in a "circular financing scheme" — using vendor financing to boost sales — drawing parallels between Nvidia and famous dot-com era accounting frauds committed by Enron and Lucent.

Enron is notorious for manipulating its accounting and using off-balance sheet debt to hide losses in its broadband business during the internet boom. Internet infrastructure provider Lucent, meanwhile, is best known for aggressively investing in and extending loans to many of its loss-making telecom customers — who then used the funds to buy Lucent equipment that they couldn't have otherwise afforded. When the dot-com bubble burst and telecom startups couldn't pay back Lucent, the company had to write down revenue tied to those transactions and lost billions of dollars.

Chanos, who is famous for predicting the fall of Enron, thinks the comparison between Nvidia and Lucent bears weight.

"They're [Nvidia is] putting money into money-losing companies in order for those companies to order their chips," Chanos told Yahoo Finance in an interview.

Nvidia has invested heavily in its own customers — from ChatGPT developer OpenAI (OPAI.PVT) to Elon Musk's xAI (XAAI.PVT) to a slew of AI cloud firms, including CoreWeave (CRWV) and Nebius (NBIS) — and those investments have raised eyebrows on Wall Street.

"NVIDIA does not resemble historical accounting frauds because NVIDIA's underlying business is economically sound, our reporting is complete and transparent, and we care about our reputation for integrity," Nvidia wrote in its memo, which was obtained by Yahoo Finance.

"[U]nlike Lucent, NVIDIA does not rely on vendor financing arrangements to grow revenue," the company continued. Nvidia noted that in typical vendor financing agreements, customers pay back suppliers over years. Meanwhile, the chipmaker said its customers pay the company within 53 days after purchasing its chips.

Burry, the "Big Short" investor who predicted the collapse of the US housing market in 2008, went further than Chanos in a post on X last week, saying Nvidia is one of multiple companies in the AI market with "suspicious revenue recognition" due to investments in its customers. Nvidia Says it Isn't Using 'Circular Financing' Schemes. 2 Famous Short Sellers Disagree_1

Nvidia Says it Isn't Using 'Circular Financing' Schemes. 2 Famous Short Sellers Disagree_1

On top of vendor financing, Chanos views the entrance of debt in the AI market as another cause of concern for investors. Like Enron, Chanos said, some of Nvidia's customers, such as Meta (META) and xAI, are using off-balance sheet debt to finance their purchases of chips. Others, such as Anthropic (ANTH.PVT), are using traditional debt funding.

"Putting lots of credit and really arcane financial structures on top of these money-losing entities is, I think, the real Achilles heel to the AI tech market," Chanos told Yahoo Finance on Tuesday.

But while accounting could play a role in fueling the AI bubble by artificially inflating demand for the tech, the two short sellers argue that the bigger problem is simpler: The biggest tech companies are spending billions in a rush to build AI data centers ahead of demand.

Burry claimed this weekend in a newsletter from his new Substack, Cassandra Unchained, that the AI market, like the dot-com era, is seeing "catastrophically overbuilt supply and nowhere near enough demand" — in other words, too many chips, servers, and data centers without enough underlying demand for AI applications used by businesses and consumers.

For its part, Nvidia sees the market accelerating, saying demand for its AI chips is "off the charts" in its latest earnings report and arguing against the idea of a market bubble. The company argued Tuesday that it's "a generation ahead" of rivals, even as rising AI chip competition from Google sent the chipmaker's stock lower before it rebounded on Wednesday.

But Chanos also thinks the rapidly accelerating AI build-out, ahead of demand, is cause for concern: "If it turns out that we don't quite need all the data center or chip capacity, we thought we will in '27 or '28, you could see orders begin to be canceled, and that's a big risk that not a lot of people are talking about."

Source: Yahoo Finance

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Manuel

Political

Commodity

Canadian Prime Minister Mark Carney announced Wednesday new supports for the steel and lumber industries hit hard by U.S. tariffs.

U.S. President Donald Trump has imposed 50% tariffs on steel and softwood lumber, long subject to U.S. tariffs, is currently taxed at 45% after the Trump administration’s hike last month.

Carney said the decades-long process of an ever-closer economic relationship between Canada and the United States is now over.

"As a consequence, many of our strengths have become vulnerabilities. Last year, more than 75% of our exports went to the United States. 90% of our lumber exports, 90% of our aluminum exports, and 90% of our steel exports, all bound for a single market,” Carney said.

“We must protect our workers and industries who are most exposed to U.S. tariffs," he said.

The plan tightens the quota on steel imports from countries that don’t have free-trade pacts with Canada from 50% to 20% of 2024 levels.

Carney also said the federal government is offering an extra $500 million Canadian (US$356 million) in loan guarantees to the softwood lumber industry on top of other measures to encourage homebuilders to use made-in-Canada materials.

Starting next spring, Ottawa will also subsidize freight fees on any rail shipments of steel and lumber across provincial borders to build up the domestic industry as Trump’s trade aggression cuts off the lucrative U.S. market.

“We will make it more affordable to transport Canadian steel and lumber across the country by cutting freight rates,” Carney said.

Trump cut off trade talks with Canada last month after the Ontario provincial government ran television advertisements in U.S. markets that criticize Trump’s tariffs by citing a speech by former U.S. President Ronald Reagan.

Carney said he’ll be in Washington for the final draw on Dec. 5 for the FIFA World Cup 2026 tournament. He said he’ll speak to Trump then and said he spoke briefly to the president on Tuesday.

“We are ready to re-engage on those talks when the United States wants to re-engage,” Carney said.

Source: AP

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Manuel

Stocks

Political

The Pentagon concluded that Alibaba Group Holding Ltd (BABAN.MX)., Baidu Inc. (BIDU) and BYD Co (BYDDY). should be added to a list of companies that aid the Chinese military, according to a letter to Congress sent roughly three weeks before Donald Trump and Xi Jinping agreed to a broad trade truce.

Deputy Defense Secretary Stephen Feinberg informed lawmakers of the conclusion in the Oct. 7 letter, a copy of which was seen by Bloomberg News, to the heads of the House and Senate Armed Services Committees.

It wasn’t clear whether the companies have been formally included in the the Pentagon’s so-called 1260H list, which carries no direct legal repercussions but serves as a major warning to US investors.

Feinberg said the three companies along with five others — Eoptolink Technology Inc., Hua Hong Semiconductor Ltd., RoboSense Technology Co., WuXi AppTec Co. and Zhongji Innolight Co. — merit inclusion on the 1260H list, , which identifies businesses connected to the Chinese military operating in the US. The list is published annually, and the most recent version, which was updated in January before Trump took office, doesn’t include them.

“In our review of the latest information available, the Department has identified eight entities that it has determined are ‘Chinese military companies’ in accordance with the statute that should be added to the 1260H list,” Feinberg wrote in the letter.

The letter was written prior to the Oct. 30 summit between Trump and Xi in South Korea, where they agreed to a package of measures including lower tariffs and commitments to pause certain export controls. A spokesperson for the Pentagon didn’t respond to a request for comment.

In a statement, China’s Foreign Ministry said it has “consistently opposed the US practice of overbroadly defining national security, establishing discriminatory lists under various pretexts, and unjustifiably suppressing Chinese enterprises.”

“We urge the US to immediately correct its erroneous actions, and will take necessary measures to resolutely safeguard the legitimate rights and interests of Chinese enterprises,” the ministry added.

Representatives of all the Chinese companies named in the letter didn’t immediately respond to requests for comment.

AI, Robotics

The inclusion of several prominent Chinese firms on the list in January triggered a stock selloff that hit Tencent Holdings Ltd. and Contemporary Amperex Technology Co. Ltd., which makes batteries for Elon Musk’s Tesla Inc. as well as other automakers. Inclusion on the list could amount to a serious challenge for Alibaba, which is stepping up efforts to compete globally in artificial intelligence, as well as the other firms.

Earlier this month, a White House memo first reported by the Financial Times said Alibaba had provided the Chinese military with technology support against targets in the US. The company rejected the claims, calling them “completely false” and a “malicious PR operation” designed “to undermine President Trump’s recent trade deal with China.”

Both Innolight and Eoptolink are leading makers of optical transceivers essential for connecting AI chips in clusters, and have been identified by Nvidia Corp. as its ecosystem partners. RoboSense provides sensors widely used in autonomous driving and robotics, is also named by Nvidia as a partner of the US firm’s autonomous driving platform.

The list, first published in 2021, now includes more than 130 entities accused of working with the Chinese military. The names include those of airlines, construction companies, shipping companies, computer hardware manufacturers and communications companies.

An analysis by the law firm of Hogan and Lovells said inclusion on the 1260H List has “several direct and indirect implications,” including restrictions on US defense contracts, potential inclusion on other restricted party lists, reputational damage and increased compliance costs.

Source: Bloomberg

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Manuel

Central Bank

Economic

U.S. economic activity was little changed in recent weeks, though employment was weaker in about half of the Federal Reserve's 12 districts and consumer spending declined, the U.S. central bank said on Wednesday, likely reinforcing concerns about labor market softening.

"Economic activity was little changed since the previous report, according to most of the 12 Federal Reserve districts, though two districts noted a modest decline and one reported modest growth," the Fed said in its latest "Beige Book" report, a compendium of survey results, interviews, and other qualitative data from its 12 regional banks.

"Employment declined slightly over the current period with around half of districts noting weaker labor demand," the report said. "Despite an uptick in layoff announcements, more districts reported contacts limiting headcounts using hiring freezes, replacement-only hiring, and attrition than through layoffs."

Published two weeks ahead of each Fed policy meeting, the report is meant to help central bankers assess the U.S. economy's health with more timely, and often more colorful, insight than is available in the official statistics.

With the data vacuum left by the record 43-day government shutdown that extended into mid-November, the Beige Book should get more weight than usual in the deliberations among deeply divided Fed policymakers, following their decision last month to cut rates by a quarter of a percentage point for the second consecutive meeting. The policy rate now stands in the 3.75%-4.00% range.

The data flow has resumed since the shutdown ended, but most of the reports issued over the past two weeks have been significantly dated, covering the period just before the shutdown began on October 1, and have offered almost no fresh insight into the health of the economy.

MARKETS BETTING ON ANOTHER RATE CUT NEXT MONTH

One of the most current indicators, however, suggests the job market remains in a stable, gradually softening state.

New claims for unemployment benefits fell last week to the lowest level since April, though the ranks of those remaining on benefits beyond a first week of assistance has plateaued near the highest level in about four years. Together, the figures point to no notable increase in layoffs despite a wave of job-cut announcements from big employers like Amazon.com, though those out of work are finding it harder to land a new job.

Interest rate futures markets are reflecting a high probability of a third straight quarter-percentage-point reduction in borrowing costs at the Fed's December 9-10 meeting.

Until last week it had been seen as a coin-toss decision amid deep divisions among Fed officials about whether more easing is needed to protect the job market or is too risky in light of inflation that remains above the central bank's 2% target. But the probability shifted sharply in favor of a rate cut after New York Fed President John Williams last week said he saw room to lower rates "in the near term."

Whatever the decision at next month's meeting, it is likely to be made over the objections of several policymakers, and will come alongside a fresh batch of forecasts from Fed officials that will show how inclined they are to bring rates down further next year.

Source: Reuters

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Manuel

Cryptocurrency

Political

Texas has taken the first formal step toward becoming the first US state to hold Bitcoin as a strategic reserve asset.

On Nov. 25, Lee Bratcher, president of the Texas Blockchain Council, reported that the world’s eighth-largest economy, valued at $2.7 trillion, purchased $5 million worth of BlackRock’s spot Bitcoin ETF, IBIT.

He added that a second $5 million allocation is already lined up for direct Bitcoin acquisition once the state finalizes a custody and liquidity framework required under a new reserve law.

The two tranches create a bridge between today’s institutional rails and a future in which governments do not just buy Bitcoin but hold it.

Texas builds the first state-level blueprint

The initial exposure did not go directly on-chain. Instead, Texas entered via IBIT, which has become the default wrapper for large allocators seeking Bitcoin access within familiar regulatory and operational infrastructure.

This purchase was enabled by Senate Bill 21, a law signed by Governor Greg Abbott in June that established the Texas Strategic Bitcoin Reserve.

The framework allows the state Comptroller to accumulate Bitcoin so long as the asset maintains a 24-month average market capitalization above $500 billion. Bitcoin is the only cryptocurrency that meets the threshold.

The structure places the reserve outside the state treasury, sets governance channels for how the assets are held, and introduces an advisory committee to monitor risk and oversight.

Meanwhile, the first $5 million is small relative to the scale of state finances, but the mechanics matter more than the number.

Texas is testing whether Bitcoin can be formalized as a public reserve instrument within a state-level financial system that already manages hundreds of billions of dollars across different pools.

Once the operational processes are in place, the second tranche will involve self-custodied Bitcoin, which introduces very different implications for liquidity, transparency, and audit practices.

The state is designing procedures that resemble sovereign-grade custody rather than institutional brokerage. The reserve will require a qualified custodian, cold-storage capacity, key management protocols, independent audits, and reporting schedules.

These are the building blocks of a repeatable template that other states could adopt without reinventing the governance architecture.

Why BlackRock’s IBIT comes first

The decision to enter through IBIT was not a signal of preference for ETFs over native Bitcoin. It was an operational workaround.

IBIT is only in its second year, yet it has emerged as the most widely held Bitcoin ETF among major institutions. The fund is the largest Bitcoin ETF product, with cumulative net inflows of more than $62 billion. Why Texas is Buying Bitcoin From BlackRock Before Building a Real Reserve_1

Why Texas is Buying Bitcoin From BlackRock Before Building a Real Reserve_1

Moreover, the apparatus for public-sector self-custody does not exist in most jurisdictions, and creating that infrastructure requires procurement, security modeling, and political signoff. So, the state used IBIT as a placeholder, a temporary facility that allows it to express exposure while finalizing the permanent structure.

This detour is instructive because it mirrors the trajectory of other large allocators.

Harvard University disclosed that IBIT became one of its largest US equity holdings in the third quarter. Abu Dhabi Investment Council tripled its IBIT exposure over the same period, reaching roughly eight million shares. Wisconsin’s pension system disclosed more than $160 million across spot Bitcoin ETFs earlier this year, also routed through IBIT.

The pattern is clear. Large institutions with different mandates, geographies, and risk frameworks are gravitating toward the same instrument. IBIT offers custody through a known intermediary, simplified reporting lines, and a clean accounting presentation under the new fair-value rules that took effect in 2025.

These conveniences have turned the ETF into a de facto entry point for public and quasi-public entities. Texas is unique only in the fact that its IBIT exposure is meant to be temporary.

What happens if others follow?

The broader question is whether Texas becomes an anomaly or a blueprint.

Bitcoin analyst Shanaka Anslem Perera said: “The cascade is mathematical. Four to eight states are positioned to follow within eighteen months, collectively commanding over $1.2 trillion in reserves. Institutional inflows projected between $300 million to $1.5 billion in near-term mimicry. This is not speculation. This is game theory in motion.”

Already, politically aligned states like New Hampshire and Arizona also have Bitcoin reserve laws because they view the top crypto as a strategic hedge to the global financial system.

More states could follow, as they could use their structural surpluses to allocate to Bitcoin for diversification, especially under the new accounting standards that neutralize earlier mark-to-market penalties.

Moreover, the implications of state-level involvement extend beyond symbolism. ETF purchases do not alter the circulating supply because the trust structure issues and redeems shares without removing coins from liquid markets.

Self-custody does the opposite. Once coins are purchased for cold storage, they leave the tradable float, reducing the supply available to exchanges and market makers.

This distinction matters if Texas scales the reserve beyond its initial $10 million. Even modest state-level demand introduces a new type of buy-side participant, one that behaves countercyclically to noise traders and does not churn positions.

The effect resembles a stabilizing anchor rather than a source of volatility. If other states adopt similar policies, the Bitcoin supply curve becomes more inelastic, increasing price sensitivity.

Source: Cryptoslate

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Adam

Economic

Key financial metrics

Alibaba reported RMB247.8 billion in revenue (versus consensus estimate of RMB242.7 billion) for the second quarter of fiscal year 2026, representing a 5% year-on-year (YoY) increase whilst remaining flat quarter-on-quarter. However, non-GAAP diluted earnings declined 71% year-on-year to RMB4.36 per American Depositary Share (ADS), approximately 20% below analyst expectations. This substantial contraction in profitability reflects the company's aggressive capital allocation towards strategic growth initiatives.

Cloud business exceeds expectation

The Cloud Intelligence Group sustained its position as the primary revenue growth driver, advancing 34% YoY to RMB39.8 billion during the quarter. AI-related products demonstrated triple-digit growth for the ninth consecutive quarter, underscoring sustained momentum in this critical segment.

Chief Executive Officer Eddie Wu addressed market concerns regarding an AI bubble during yesterday's earnings call, indicating the company maintains confidence in the sector’s prospects in the next three years. He articulated Alibaba's strategic commitment to expanding AI infrastructure capabilities to accommodate surging market demand and navigate intensifying competitive pressures within the rapidly evolving technology landscape.

The company is positioning itself to establish leadership within China's consumer AI applications sector, particularly given the absence of Google's Gemini and OpenAI's ChatGPT in the domestic market. Alibaba's proprietary AI application Qwen achieved over 10 million downloads within four days of launch this month, surpassing the initial adoption trajectory of DeepSeek upon its market entry.

Core retail business demonstrates resilience

Supported by government consumption stimulus measures and enhanced marketing expenditure, Alibaba's local e-commerce segment recorded 16% revenue growth – the fastest expansion rate since 2021. The company prioritised operational efficiency improvements within its quick commerce operations, yielding enhanced customer retention metrics and elevated average order values.

The Singles' Day Shopping Festival successfully generated double-digit consumer growth YoY on the Taobao platform, substantially supported through promotional discounts underwritten by the retailer. These outcomes will be reflected in third quarter financial results.

Marketing spend and AI investment constrain profitability

However, the robust revenue growth trajectory came at considerable cost. Sales and marketing expenses more than doubled to RMB66 billion as the company competes for market share against rival quick commerce platforms including JD.com and Meituan. Adjusted EBITDA for the China E-commerce Group contracted 76% YoY. We anticipate marketing expenses will remain elevated in the near term.

Alibaba's balance sheet position has deteriorated, reflecting a net cash flow outflow of RMB21.8 billion last quarter. An 80% YoY increase in capital expenditure served as the primary driver, as the company pursues aggressive investment in AI infrastructure development.

Share price analysis

Alibaba's ADR initially advanced approximately 3% during US pre-market trading following the results, though this optimism swiftly reversed as investor concerns regarding AI expenditure and margin compression intensified. Hong Kong-listed shares also opened lower today. Despite closing 2.3% lower in US markets yesterday, the security has delivered 86% year-to-date gains, significantly outperforming the MSCI China Index.

From a fundamental analysis perspective, the stock's 12-month forward price-to-earnings ratio has expanded considerably from 12 times to 18 times over the past six months. As market participants increasingly focus on profit-taking ahead of year-end, a retracement following the sustained rally since April appears unsurprising.

From a technical analysis standpoint, the share price has rebounded from $148.6, approximately a 50% Fibonacci retracement level from the recent upward wave. The recovery trajectory will encounter resistance around $182.5. Maintaining support above the 200-day moving average at $135.1 remains critical for sustaining the ascending medium-term trend. Failure to hold this level may trigger further downside towards the $115–$120 range.

Figure 1: Alibaba daily price chart

as of 26 November 2025. Past performance is not a reliable indicator of future performance.

Source: ig

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Bond

Central Bank

Mortgage rates dropped slightly this week amid new signals that the labor market is weakening and the Federal Reserve will cut interest rates again next month.

The average 30-year mortgage rate was 6.23% through Tuesday, according to Freddie Mac data, down from 6.26% a week earlier. The average 15-year mortgage rate was 5.51%, from 5.54%.

The 10-year Treasury yield, which mortgage rates closely track, has been falling as odds of a benchmark rate cut in December are on the rise. In recent days, New York Fed president John Williams, San Francisco Federal Reserve president Mary Daly, and Federal Reserve Governor Christopher Waller have all signaled in interviews or speeches that they would support cutting next month.

Consensus about a December rate cut is growing as new data suggests the labor market continues to weaken. This month, job losses at private employers sped up, according to data released on Tuesday by payroll processor ADP.

Traders now see an 83% chance of a 25-basis point cut at the Fed’s Dec. 9-10 meeting, according to CME FedWatch. Although mortgage rates aren’t directly controlled by the Fed, they do move based on expectations about future Fed interest rate policy.

Another cut "could bring mortgage rates near 2025-lows just as the year comes to a close," Jake Krimmel, Realtor.com senior economist, said in a statement.

"This would give homebuyers something to be thankful for heading into 2026, while potentially buoying a housing market which has seen some light tailwinds of late," he added.

Treasury yields and mortgage rates also moved lower on Tuesday after Bloomberg News reported that White House National Economic Council Director Kevin Hassett, a close ally of President Trump and a supporter of lower rates, is seen as the likely frontrunner to succeed Jerome Powell as Fed Chair.

Mortgage rates have been hovering around year-to-date lows of 6.2% to 6.3% for most of this fall, bringing some buyers back into the market. Contract signings jumped 1.9% in October from a month earlier, new National Association of Realtors data showed. Applications to purchase a home were up 8% through Friday compared to a week earlier, according to the Mortgage Bankers Association.