The current situation bears structural similarities to three major accounting frauds: Enron (2001), WorldCom (2002), and Lucent Technologies (2000).
Lucent, once America’s largest telecommunications equipment manufacturer, grew revenue through vendor financing arrangements. The company lent money to telecom carriers to purchase Lucent equipment, booking the equipment sales as revenue while the loans appeared as receivables. When carriers couldn’t repay, Lucent took $8.7 billion in writeoffs.
Lucent’s DSO peaked at 64 days before the fraud became public. Nvidia’s current 53-day DSO remains below that threshold but exceeds its historical baseline by the same percentage that preceded Lucent’s collapse.
Enron used Special Purpose Entities to hide debt and inflate revenue. These entities existed as legally separate companies but were economically controlled by Enron. The structure created artificial revenue through transactions with entities Enron itself funded.
The xAI SPV structure mirrors this approach. Nvidia provides equity capital to an entity that exists primarily to purchase Nvidia products. The transaction appears as an arms-length sale in Nvidia’s accounting, but economically, Nvidia is funding its own revenue.
It’s being handled by algorithms and AI, not people. It requires only a relatively few people at the top of the largest hedge funds and financial institutions, all of whom are benefiting from it. Truth be told, they don’t look at themselves as bad guys and in all honesty, they might not be. Aside from the unfortunate side effect of giving them the power to pick winners and losers, literally everyone benefits from a market that can’t implode.
It’s not like it isn’t being said openly in certain corners of the Internet. Anyone who “breaks ranks” and says it will just be downvoted and ignored as a crank (as my simple comments here can attest). In the meantime, the indices will fluctuate and react to the news giving a veneer of authenticity, yet the march will move ever upward (as it has, manifestly, since the last “real” crash, 2008).
For those who think this is just bullshit, I would suggest that you read a fantastic book called Flash Boys and then contemplate that it was written in 2014. The author, Michael Lewis, had this to say, also, 11 years ago.
The comforting thing about the conspiracy mindset is that it means someone is in control. They might be evil or selfish or AI or lizard people whatever but at least the world makes sense, has a structure and someone has it nailed down. People crave this security and will seek to build evidence for it. They may not “like” the picture they end up drawing but they like having a picture because it feels solid and graspable. Understandable.
The scary truth is none of it makes sense, there is no one with their hand on the tiller and anything can happen.