This Thanksgiving’s Main Event: Michael Burry Takes on Nvidia

Michael Burry’s Bold Challenge to Nvidia: A High-Stakes Gamble on AI’s Future

While you’ve been busy preparing for Thanksgiving, renowned investor Michael Burry, famously portrayed by Christian Bale in “The Big Short,” has entered an intense conflict with Nvidia.

Burry’s Unconventional Fight Against AI Dominance

This clash is one to watch closely, as Burry seems poised to make waves. What sets this apart from typical warnings about an AI bubble is Burry’s growing following and his ability to stir significant doubts about Nvidia’s dominance in the market.

Can Burry Spark Doubt and Disruption?

Investors are curious whether Burry can instill enough skepticism to genuinely undermine Nvidia and its key associates, such as OpenAI.

Escalating Tensions: Burry vs. Nvidia

In recent weeks, Burry has intensified his attack on Nvidia, publicly clashing with Palantir CEO Alex Karp. After revealing his substantial short positions against both companies, Burry has wagered over $1 billion that their stocks will plummet. This exchange illustrates a pivotal debate: is AI a genuine game-changer or merely a bubble waiting to burst?

Specific Allegations: Nvidia Under Fire

Burry has made precise and serious claims, suggesting Nvidia’s stock-based compensation has cost shareholders an astounding $112.5 billion, effectively halving owner earnings. He accuses AI companies of manipulating financials by understating depreciation on fast-declining equipment, hinting that demand from AI customers is merely a facade propped up by deceptive financing practices.

Nvidia’s Response: Defending Its Position

As Burry’s influence grows, Nvidia felt the need to respond to his allegations in a detailed seven-page memo to Wall Street analysts, claiming Burry’s calculations are flawed and defending its compensation practices as standard within the industry.

Burry’s Retort: Comparisons to Past Market Crashes

In response, Burry clarified that he doesn’t liken Nvidia to Enron, but to Cisco at the height of its overextension in the late 1990s, cautioning that Nvidia’s stock could similarly plummet when reality sets in.

The Stakes: A Potential Market Shift?

All eyes are on Nvidia, which has seen its stock multiply twelvefold since early 2023, currently boasting a market cap of $4.5 trillion. Burry’s past predictions have been a mixed bag, earning him the label of “permabear” among critics, with some followers missing substantial market gains due to his consistently bearish outlook.

Burry’s New Platform: Unleashing His Views

Recently, Burry deregistered his investment firm, Scion Asset Management, which he claims hindered his ability to communicate freely. He has now launched a Substack newsletter titled “Cassandra Unchained,” offering insights into his analysis on stocks and potential market bubbles.

The Growing Influence of Burry’s Voice

Just days after its launch, Burry’s newsletter has already attracted 90,000 subscribers. This begs the crucial question: Is Burry a harbinger of an impending market collapse, or will his amplified voice trigger the very downfall he warns against?

Historical Precedents: The Power of Persuasion

History suggests that a vocal critic can precipitate market crises. Influential investors like Jim Chanos and David Einhorn have previously ignited skepticism that accelerated declines in companies like Enron and Lehman Brothers. Burry, with his substantial following, may wield similar influence.

The Big Question: Burry vs. Nvidia

Should enough investors heed Burry’s warnings about potential overbuilding in AI, a selling spree could ensue, validating his bearish stance. The landscape remains uncertain; Nvidia may be at risk, while Burry has little to lose but his own reputation as he rallies his base.