A seemingly perfect earnings report—how did it wipe out over $140 billion in market cap within 18 hours? This time, Nvidia crashed, and the algorithms might have been sharper than the human eye.

**First the celebration, then the crash**
When the earnings report first came out, the numbers looked great—revenue of $57.01 billion, earnings per share of $1.30, both beating expectations. After-hours, the stock soared 5%, instantly adding $130 billion in market cap. But before the next day’s close, everything changed: the stock price plummeted, evaporating $142.9 billion in a single day, dragging down the Nasdaq with it. Worse yet, the entire AI sector suffered—Micron fell 10%, SanDisk was slashed by 20%.

**Three major red flags uncovered by algorithms**
Interestingly, this time it wasn’t analysts sounding the alarm, but algorithms that first spotted something off. They scanned the financial statement notes and dug up several fatal bugs:
- **Accounts receivable exploded:** $33.4 billion in receivables, up 89% year-over-year, with collection periods dragged out from 46 to 53 days. Compared to peers like TSMC and AMD, these numbers are absurdly high—$10.4 billion is likely unrecoverable.
- **Conflicting inventory data:** On one hand, they claim explosive demand and tight supply; on the other, inventories piled up to $19.8 billion, jumping 32% in just three months. How does that make sense?
- **Cash flow doesn’t add up:** Reported profits of $19.3 billion, but operating cash flow is only $14.5 billion—a conversion rate of 75%, while normal tech companies are above 95%. Where did the money go?

**The truth behind the circular game**
Even more damning, the algorithms traced a “left hand to right hand” scheme: Nvidia injects $2 billion into xAI, xAI then borrows $12.5 billion to buy Nvidia chips; Microsoft invests in OpenAI, OpenAI promises to buy Microsoft’s cloud services, then Microsoft places huge hardware orders with Nvidia. The same money circulates among several companies, and every round counts as new revenue, but actual cash payment? Doesn’t exist.

**Smart money bailed early**
PayPal founder Peter Thiel sold $100 million in shares on November 9, SoftBank dumped $5.8 billion on the 11th, and even “The Big Short” legend Michael Burry bought put options, betting the stock would fall to $140 before March 2026. In hindsight, these big players had a sharp nose for trouble.

How much longer can the chip stock myth hold up? This algorithmic smackdown might just be the beginning.