Nvidia and Investor Michael Burry Clash Over AI Bubble Claims

The BareStory

Investor Michael Burry has publicly argued that the artificial intelligence market is a bubble centered on chipmaker Nvidia, drawing parallels to the telecom infrastructure boom of the late 1990s. In response, Nvidia reportedly circulated a private memo to financial analysts disputing his claims. Burry, known for a successful bet against the 2008 housing market, later acknowledged the memo and stated he stood by his analysis.

Burry's argument, based in part on research from his former associate, suggests that massive capital investments in AI infrastructure far outpace the economic demand for the technology. The analysis highlights a disparity between AI service revenue and the trillions of dollars projected for data center spending. It is argued this mirrors the overbuilding of fiber-optic networks that preceded a market collapse in the early 2000s when supply outstripped demand. It has been reported that Burry is taking short positions against AI-related companies.

The dispute involves specific financial claims and counter-claims. Burry has questioned Nvidia's stock buyback figures and suggested that customers overstate the useful lifespan of its graphics processing units (GPUs) to justify spending. He also raised the possibility of "circular financing."

In its memo, Nvidia countered these points, asserting its share repurchase figures were lower than Burry alleged due to a miscalculation on his part. The company stated its GPUs are depreciated by customers over four to six years based on real-world longevity and that older models remain in high use. Nvidia also rejected the circular financing suggestion, stating its strategic investments are a small fraction of its revenue.