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Strategies & Market Trends : The Art of Investing
PICK 45.35+0.2%Nov 7 4:00 PM EST
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To: Johnny Canuck who wrote (10321)10/11/2025 2:23:41 PM
From: Sun Tzu1 Recommendation

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chip

   of 10550
 
That's a serious watch point, but not a cause for concern *yet*.

Vendor financing by itself doesn't make it a fake revenue. It only becomes a problem under two scenarios:

1. The vendor wants make quarterly revenue numbers and ends up recognizing revenue via end of quarter "promotions" or worse do what Xerox used to do and ship products without orders only to have the customer return it during the next quarter. This is relatively rare but can happen. And when it does, it's a flag to immediately short the stock and fight the tape for it.

2. The more common case is when the customer is no longer creditworthy but the finance department will keep extending the credit because there's an inherent conflict of interest between the financing department and the parent company. This one can drag on for a long time. GE was an example of it dragging on forever whereas Boston Chicken provides a more dramatic example. Nortel fell somewhere between the two.

.

Neither is a concern right now because all indications are that the demand for AI data centers is real. But when that demand softens, we will need to watch it carefully.
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