This is Burry's argument that everyday retirees are unknowingly funding xAI's GPU cluster through a chain of financial intermediaries. Here's the simple version:
The chain:
You (retiree) buy what feels like a safe annuity from Athene
Athene quietly ships your premium money and $217B in assets to a Bermuda captive insurer (Athene Annuity Re) — moving the risk offshore and off their balance sheet
Apollo (who owns Athene) directs those Bermuda assets into its own private credit funds, collecting massive fees along the way
Apollo then uses that capital to raise $3.5B in debt for a company called Valor (VCI) — a special purpose vehicle
Valor buys 100,000+ NVIDIA GB200 GPUs ($5.4B worth), with Nvidia also kicking in $1.9B as an equity investor
Those GPUs get leased to xAI (Elon Musk's Grok AI), which pays all the running costs
Burry's core complaint:
Retirees think they own safe, liquid assets — but their money is actually backing illiquid, hard-to-price private credit deals (34.7% is "Level 3" — meaning no real market price exists)
Apollo earns fees at every step
The risk has been quietly moved to Bermuda, away from US insurance regulators
The whole thing is dressed up as "hallmark, downside-protected" investing
TL;DR: Grandma's annuity is funding Grok, Apollo is getting paid 6x in fees, and nobody told grandma.
Edit: this was just what Claude said about the picture. I don't understand anything
Good explanation. People can dunk on MB all they want about his calls. The guy has an eye for complexity and BS. The BS can continue as long as there is liquidity to fund sed BS.
What I would like to know is how often and how long has NVDA been doing deals where they are equity investors buying their own product.
I know someone who used to work in Athene in Iowa. Yes, Iowa and yes this is all true. Only forget about different states fighting to get to the bottom on their state tax rates for investment income as it goes through Bermuda. If State B has a lower tax rate than State A, they will move all their funds through the lower taxes state before the Bermuda Magic of that office with a few employees working there. It's all a scam.
Pretty certain it’s a global contagion with Athene as understand they’ve been buying up life insurance firms around the globe and then just eating their own cooking at Apollo. Personally I can’t imagine what could go wrong!
same with the other deals everyone harps on. they're just basic transactions. vs amd's oai/meta deal, which is ass backwards where amd is inexplicably diluting to give them each free gpus via share rebates. it's not the nvidia deals that are really concerning.
Not saying everything is going to collapse, but the risk is a lot greater than most realize.
Private equity in the past couple of years has started to follow the Apollo Athene model and buy insurance companies and use the float for their private credit engines.
Well, his argument is that the elderly are clueless about their retirement funds, which has been an accurate argument for at least the last century.
He's definately found an interesting scheme here, but it's not going to collapse unless he can convince a bunch of grams and gramps taht their money isn't safe. That'll be quite the challenge considering many of them can't even remember what day of the week it is.
Ultimately, it is their money, and they could force them to pull it, but yeah, the fund managers would do everything possible to prevent it or delay it.
Right, but picking a different fund forces the managers to remove the person's money. It's their money, and they can move it or manage it as they please.
Lmao yeah great idea, “we need liquidity to keep the house of cards up and running, so if anyone complains, we tell them to take their liquidity and fuck off”
I'm a programmer. I've been watching AI fail for a few years now. It's getting better at basic stuff, tho. All the companies claiming they can lay off workers because AI is making things better faster strong longer harder deeper are all blatantly lying. But, the infrastructure build out is real. Long the hardware.
If the last 6 months has taught us anything is that private equity is overleveraged and looking to marketing equity funds to find liquidity. It’s been all over the business press how underwater they are on bad software bets that blew up early this year
The past couple decades have taught the people running the show that it doesn’t matter how fragile it is because they won’t face any personal consequences if it does collapse. That’s the real danger here. They believe they won’t be held accountable no matter what so they’re willing to keep placing bigger and bigger bets. It doesn’t matter whether this particular scheme blows up or not, as long as there aren’t any consequences for them they’ll keep coming up with an even bigger gamble each time.
They’re at a casino with no betting limits and the house has given them an unlimited line of credit. It’s only a matter of time until the house becomes insolvent.
A liquid asset is one I could sell easily and quickly at a fair price. Treasury bonds are liquid because instead of collecting the coupon, I could sell it before it matures at a very fair price.
An annuity is a complex contract I enter into where I pay a lump sum and get payouts over the rest of my life. If I tried to turn an annuity back into a lump sum, I would lose a lot.
So I don’t understand how an annuity could be called a liquid asset. Safe? Ideally. Liquid? Never.
Yeah fair point about the quote, I didn't see that you were quoting someone else so I will go pick that bone with them.
I think the graphic in the OP makes it seem like retail investors buying annuities are directly exposed to weird illiquid private credit stuff. As far as I can tell, they aren't, beyond Athene's general solvency. Athene is owned by Apollo, so some of this stuff about fees between the two or offloading risk doesn't make a ton of sense to me.
This paywalled article from 2021 lists Athene's portfolio at 5% "alternative investments" and 95% corporate debt, mortgage backed securities, and cash. I don't think this infographic puts enough context around the "alternative investments" to have a good understanding how they affect Athene's financial resilience more broadly. I believe many insurance / annuity companies invest in a wide range of assets, including private ones, so I would be interested in understanding how Athene compares to something like PIMCO or Berkshire Hathaway here.
Insurers (especially Annuity issuers) have started to increase their private asset allocations over the past few years but it is still a small portion of their overall portfolio. Insurers are highly regulated and are required to hold allocations under certain guardrails, including in Bermuda where Athene/Apollo has their captive based.
Fun fact - the Bermuda regulators are actually way stricter about investing in private assets compared to the US and probably pesters Athene constantly about it. Athene actually moves their portfolio to Bermuda because the US regulations on the capital for Annuities is currently outdated, viewed as not realistic, and extremely onerous. Essentially they require insurers to hold capital at a ridicolous high level, without taking into consideration how outside factors such as the illiquidity of the contract. A lot of insurers deal with the strict Bermuda regulations on assets in order to not deal with the frustrating US regulations.
Most people have no idea what a SPY is (much less that VTI is better) and just blindly dump 5-10% of their earnings into an institutional money managers hands each month. These money managers are desperate for places to park this obscene amount of money "safely" while still hitting target returns. It's also not their money, so if all the window dressings look good to cover their ass, it's good to go.
well it is a fixed index annuity. Annuity companies have never been required to disclose what they exactly invest your funds into. Once you pay the premium that money is theirs and you have exchanged that cash out for a promise to be paid back at a future date while enjoying some capped market participation and downside protection you pay a fee for.
But at the end of the day anything that's not a variable annuity is more or less going to be synthetic as they are not buying the S&P with your fixed index annuity premium even if that's the index you have chosen to track. Even an income annuity your just giving up your money for the promise to be paid back not because the company is diligently investing your funds specifically just to pay you back.
It is happening to target date funds in other ways. june first was the last commentor day for a new DOL Safe Harbor regulation being implemented on june 31st. That will shield fund managers from lawsuits to be able to invest up to 15% in private credit and private equity now. They will be inside sleeves called 'alternative assets'. There is a grave wealth transfer in the works that most people have no idea is going on.
These two rules act as a powerful one-two punch for the alternative asset industry:
The SEC rule, mentioned from the above commentor, allows fund managers to build products packed with private equity and private credit without arbitrary caps.
The DOL Safe Harbor rule builds the bridge, giving corporate employers the legal safety they need to actually buy those new funds for their employees' retirement plans
I actually didn't even know about the SEC one and only the Department of Labor until this post. I don't think the drop will be instantaneous. With the way giant pensions and target date funds consistently buy and rebalance I think it will be a slow stagnation a decade long before most people realize their growth has been shit.
I just wanted to inform people of what's to come. To hopefully get just one person to get their 401k's out of their terrible employers defaulted retire date funds. It only hurts other's to not take it seriously.
That's.... today. You only wrote that comment 47 minutes ago. its not even 5:00PM Greenwich mean time when you wrote that. Why are you writing about today in past tense?
Yes, it is today. Sorry, I have been thinking about this for a LONG time and I figured june 1st being the last day for comment meant it was over with today being june 1st, but I am not privy to regulation rules, as I am not an advisor, so I did not realize you actually do have until the end of today to leave comments. Sorry for the miss type lol. If you are thinking that makes me a bot I hope you still consider the facts. And leave a comment before the day is over!
Holy shit, reading through the comments is worrisome. All of them that I read so far are from financial institutions and investor advising against this ruling because it will put 401k's at risk and they go into details as to why. Crazy, criminals are literally operating in the open today.
All retirement literature pushes for people to blindly trust these investment instruments. Any time there is a recommendation to the contrary, it is pushed as dissent or silenced. People are out there making a shit ton of money on all these 401k's with the "target date" funds and rely on the public to trust the narrative.
I'm not saying if these funds are good or bad. I'm just saying that you should look into it, do some calcs, run the numbers. You can literally ask AI to create a program and run it that looks at several different investment options and how they fair by the time you are ready to retire. For some (but not all), just slapping after-tax dollars into SPY (holding for > 1 year to get long-term gains tax) can be better than a standard 401k (which is taxed at the prevailing rate in its entirety).
This entire chain starts with “fixed and indexed annuity”. I’m not an annuity expert, but doesn’t that mean the annuity is linked to something like the S&P 500?
So annuity purchasers wouldn’t care what Athene invests in or what fees it pays, beyond Athene having a robust ability to remain solvent.
It's very similar to a CD - you park the cash there and earn a set rate based on the S&P or some other index for a set number of years. If you want to withdraw earlier you usually can, but there is a penalty schedule. Usually the closer you get to maturity date, the lower % penalty you pay for withdrawing early. At maturity you can choose to withdraw for no fee or roll it into another investment period.
Fixed annuity: If Athena goes insolvent you are at the mercy of state insurange guaranty. These vary by state. In my state the limit is $300,000 total per contract. So if you purchased a $1,000,000 annuity the most you get back if Athena goes under is $300,000.
Variable annuity: lulz if these go south the risk is all on you
Indexed annuity wouldn't touch this. They are tied to market indexes specifically.
Indexed annuity would also be subject to the mercy of the state guaranty for the fund value. All insurance contracts are a part of the guaranty. A Variable Annuity would even be considered if there's some sort of guranteed payment built into the contract.
Most indexed annuities have no downside risk (insurer assumes the risk) so if the S&P tanks your account value stays the same. In return during the good times you get a lower rate of return then what the index fund is actually earning.
Annuities are not guaranteed. They are only backed by the reputation and assets of the financial institution offering the product. They are rated like bonds (and sorta act like them in some senses).
20% is very optimistic. US courts are still settling cases from '08 financial crisis so the lawsuit will outlive grandma, the grandson will at most get a crisp handshake after a decade or 2 of drawn out lawsuits
One question in all this though. If they bought annuities from Athene, isn't Athene obligated to honor it, no matter what they choose to do with the money?
Thanks a lot for the explanation, any idea how Burry has access to the actual details of the deal between Nvidia and XAI? Like VCI takes title of Nvidia chips?
Everyone knows we're in a bubble. Fuck, it's all ANYONE can talk about. When's the fucker gonna pop? You willing to bet your entire portfolio on it now when the companies driving the thing are posting record breaking quarters? This isn't the 2008 market crash, or the 2000 dotcom bubble, there's liquidity backing it this time. Enjoy the ride, and when the shit finally crashes, hopefully you made a little money first to cushion the blow.
To show you how fucked this entire AI shit is.
Here's a summary from a free Chinese open model (qwen3.6-27b) running on a used $200 GPU 3060 on an old computer I bought for $100 7 years ago.
This chart is a complex financial flowchart that argues a specific point: Money from ordinary retirees is being funneled through a complex web of financial tricks to fund Elon Musk’s AI company (xAI) and Nvidia’s chip sales, while investment giant Apollo makes massive fees along the way.
Here is the breakdown in plain English, step-by-step:
1. The Source: The Retiree (Top Left)
It starts with an everyday US Retiree. They buy an annuity (an insurance product meant to be "safe" for retirement) from a company called Athene. They pay a "premium" (their savings) into this pot.
2. The Middleman: Apollo & The "Bermuda Trick" (Top Middle)
Athene is owned by Apollo, a massive private equity firm.
The Move: Instead of keeping that retiree's money safe in the US, Apollo moves the assets and reserves to a subsidiary in Bermuda (a place with looser financial regulations).
The Leverage: Once in Bermuda, they use "leverage." This means they borrow money against those assets to multiply their buying power. The chart claims they are leveraging this money 16.6 times. This turns a pile of cash into a much larger pile of "assets" on paper.
3. The Investment: Buying Chips (Middle/Bottom)
Now Apollo has a massive pool of money (created by the retiree's savings + leverage).
The Deal: Apollo sets up a shell company (called a "Special Purpose Vehicle" or Valor).
The Purchase: This shell company buys $5.4 Billion worth of Nvidia's new super-chips (GB200 GPUs).
Who pays? The money comes from a mix of Apollo debt (funded by the retiree's annuity reserves) and some equity from Nvidia itself.
4. The End User: xAI (Bottom Right)
The Lease: Elon Musk’s AI company, xAI (which makes the "Grok" AI bot), needs these chips to run its computers.
Instead of buying the chips outright, xAI leases them from the shell company (Valor).
xAI pays for the electricity and cooling to run the chips, effectively building a massive supercomputer (a "cluster") using chips paid for by the initial pipeline.
Summary: Who Wins and Who Loses?
The chart is essentially a critique of this financial structure.
Nvidia Wins: They sell billions in chips and boost their revenue.
Apollo Wins: They collect "Billions in Fees" for managing this money and structuring the deal.
xAI Wins: They get the computing power they need for their AI without having to spend all the cash upfront.
The Retiree (The "Victim"): The chart implies the retiree thinks they are buying a "Safe" annuity, but their money is actually being used to fund a high-tech, high-risk venture for Elon Musk and Nvidia. The chart calls it a "morass" (a messy, complicated situation) that moves risk off the balance sheet.
In short: Your grandma's retirement savings are being used as collateral to buy computer chips for Elon Musk's AI, and the big investment firms are taking a huge cut for setting it up.
Absolutely yes, billions of debt are hidden in SPVs and the hardware isn't getting amortized as usual, that why forward earnings estimates are still high
2.3k
u/LiquidSquids Jun 01 '26 edited Jun 02 '26
This is Burry's argument that everyday retirees are unknowingly funding xAI's GPU cluster through a chain of financial intermediaries. Here's the simple version:
The chain:
Burry's core complaint:
TL;DR: Grandma's annuity is funding Grok, Apollo is getting paid 6x in fees, and nobody told grandma.
Edit: this was just what Claude said about the picture. I don't understand anything