Fundstrat's Tom Lee has pushed back on the Enron warning hanging over the AI trade. He says the $3 trillion in off-balance-sheet deals scaring Wall Street tells investors little about the real risk. The rebuttal answers Michael Burry's latest attack.
The Big Short investor doubled his bet against Nvidia (NVDA). He compared the chipmaker's $500 billion financing push to the tricks that sank Enron. Enron was an energy giant that collapsed in 2001.
It hid billions in debt inside side vehicles that never touched its balance sheet. Its $60 billion bankruptcy was the largest in US history at the time. The Wall Street Journal revived the ghost this week.
Its analysis found nine tech giants carrying $3 trillion in AI commitments off their books. That is 50 times the size of Enron's entire bankruptcy. The total includes $1.2 trillion in leases that have not started.
Another $1.9 trillion sits in chip purchase deals. Meta's Louisiana data center shows how the structures work. The company owns just 20% of the project, while private credit firms hold the rest.
Burry, who made his fortune shorting subprime mortgages before 2008, smells the same playbook. He called Nvidia's $500 billion funding pact with Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs, and KKR a public relations stunt. In his view, it distracts from the rising cost of insuring Nvidia's debt.
Extract — continue reading at the source.
