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.

Why the Enron Warning Took Over Wall Street

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.

“Structuring credit is a natural part of the system. Structuring unnatural credits to prolong momentum late in the bull phase is where the worry comes in,” Burry wrote this in his Substack newsletter.

The short extends his bearish streak. Earlier this month, he warned US stocks face a 1987-type crash risk even as indexes set records.

Nvidia CEO Jensen Huang rejects the charge. He says the deal brings independent, long-term capital into AI infrastructure and reflects real demand.

Tom Lee Says the Numbers Misread How Finance Works

Lee took the other side on Monday, appearing on CNBC beside Pence Capital Management investment chief Dryden Pence. His core point is simple. Gross obligations in finance always dwarf the assets underneath them.

“The revelations from the journal article are actually helpful, but they’re giving people an incomplete picture of how financial systems work,” Lee said in the interview.

He pointed to options and swaps, where paper exposure runs far above the cash at stake. Warren Buffett once called credit derivatives financial weapons of mass destruction for that same reason, Lee noted.

The commitments also come with exits. They hit balance sheets only when construction starts. Companies can cut future spending without facing lawsuits.

Lee lived through the era people should actually fear. As a tech analyst in the 1990s, he watched fiber firms invent hundreds of billions in revenue through swap deals. Today’s spenders are different, he argued. The Magnificent Seven, the market’s seven biggest tech stocks, earn some of the highest margins in corporate history.

Crypto readers know Lee as chairman of BitMine, the world’s largest corporate Ethereum (ETH) treasury. The firm held 5.8 million ETH, or 4.8% of supply, per its August 17 release. Lee recently argued markets now see Ethereum pulling ahead of Bitcoin (BTC).

AI Spending Set to Pass the Pentagon’s Budget

Pence sized up the boom with one comparison. Congress set the Pentagon’s 2026 base budget at $866.6 billion, per an AEI breakdown. By 2027, Pence expects the US to spend more on AI than on defense.

The buildout already absorbs 2% to 2.5% of US GDP, he estimated. America spent a similar share on the transcontinental railroad in the 1850s.

The upside case rests on adoption. Only 30% of companies report productivity gains from AI so far, Pence said. Just 7% call their rollout complete. That leaves most of corporate America still at the starting line.

The fight now comes down to one number. If productivity keeps climbing, the $3 trillion looks like railroad track. If it stalls, Burry’s Enron warning gets much harder to dismiss.

Source: BeInCrypto