Famed investor Michael Burry has amplified his critical stance against Nvidia and other artificial intelligence (AI) sector companies, engaging in public commentary and disclosing significant bearish options positions. These actions have drawn a direct rebuttal from Nvidia, detailing a growing public debate over the valuation and financial health of key AI players.
Burry, known for his prediction of the 2008 housing market collapse, has executed bearish put options on Nvidia and Palantir Technologies, a bet reportedly valued at over $1 billion. He has also publicly leveled specific allegations against Nvidia's financial practices. These include claims that the company's stock-based compensation has significantly reduced shareholder earnings, and that AI companies may be misrepresenting the useful life of GPUs to justify capital expenditures. Furthermore, Burry has suggested that customer demand in the AI sector is artificially inflated through a "circular financing scheme."
Nvidia has formally responded to these allegations. According to a seven-page memo sent to Wall Street analysts by the company's investor relations team, as first reported by Barron's, Nvidia refuted Burry's calculations. The memo stated that Burry "incorrectly included RSU taxes" in his assessment of stock-based compensation, clarifying that the actual buyback figure was $91 billion, not $112.5 billion. Nvidia also asserted that its employee compensation practices are "consistent with peers."
The investor's campaign has included a public exchange with Palantir CEO Alex Karp, where Karp criticized Burry's strategy. Burry subsequently deregistered his investment firm, Scion Asset Management, with the U.S. Securities and Exchange Commission, citing "regulatory and compliance restrictions that effectively muzzled my ability to communicate." He has since launched a paid Substack newsletter, "Cassandra Unchained," to disseminate his market views to a subscriber base reported to exceed 90,000.
Burry's track record includes both successful market calls, such as the 2008 housing crisis, and subsequent periods of underperformance and failed bearish predictions, earning him the moniker "permabear" from critics. Nvidia's stock has seen a twelvefold increase since early 2023, pushing its market capitalization to approximately $4.5 trillion. Market observers note that influential short sellers with public platforms, such as Jim Chanos regarding Enron and David Einhorn concerning Lehman Brothers, have historically contributed to shifts in investor confidence, accelerating market reactions to underlying issues.
