In the late 1990s, Lucent Technologies lent billions of dollars to small American telephone companies so they could afford to buy Lucent's equipment.
Within 3 years, dozens of those customers were bankrupt, Lucent had written off billions, and one of the most widely owned stocks in the country never really recovered.
Fast forward to 2026, famous short sellers like Michael Burry and Jim Chanos have spent months arguing that Nvidia (and other AI companies) are running the same play.
Burry shared a Bloomberg diagram tracing roughly $46 billion in direct equity stakes and $879 billion in multi-year purchase commitments moving between Microsoft, Oracle, Amazon, Google, Meta, OpenAI, Anthropic, xAI, CoreWeave, Nvidia and AMD.
You’ve probably seen the picture in question - but if not, here it is…
Money leaves Nvidia as an investment... and money returns to Nvidia as revenue.
So the bears see all those lines linking to together and start to scream CIRCULAR FINANCING!!!
Now here is the part that gets skipped…
Nvidia sent Wall Street analysts a seven page memo rejecting the comparison.
In classic vendor financing, the customer pays you back over years.
Nvidia's customers average payback period is about fifty-three days. That is not a loan, that is an invoice.
The second difference is who is holding the bill…
Lucent lent to capital-starved telecom startups with almost no revenue and no access to cheap credit. When funding dried up in 2001, they simply stopped existing.
Nvidia's largest disclosed customers are among the most creditworthy companies on earth, funding this spending out of cash their existing businesses actually generate.
Whatever you think of the valuations, or CAPEX spending… Microsoft and Google are not Winstar Communications.
And these kind of agreements are not novel either…
In 1997, Microsoft put $150 million into Apple and committed to keep making Office for the Mac. That was a supplier investing in a customer to keep a customer alive. Nobody calls it fraud, because it worked and because the underlying product was real.
Intel spent decades funding companies building on its architecture for the same reason…
More recently, Google agreed to guarantee lease payments on several Anthropic data centres, which helped Anthropic secure around $35 billion in loans. Same shape, different label.
But do the bears have a point? Kind of…
The biggest one is scale, Nvidia's committed investments are roughly 60% of its annual revenue. Lucent's vendor financing commitments peaked at about 25% of their revenue…
And you can’t deny that the optics of this have hurt Nvidia’s stock price in the short term…
But ultimately, the circle is not the problem.
Money moves in circles constantly.
Your employer pays you… you buy their competitor's product… the competitor's employees buy something your employer makes.
Circulation is quite literally what an economy is.
The question is whether outside money is entering the circle…
Somewhere at the end of all this, a business or a consumer has to hand over cash they earned doing something unrelated to AI, in exchange for something AI did for them.
As long as that money is arriving and growing, the financing structures are just plumbing…
Oliver