While you were focused on Thanksgiving plans, famed investor Michael Burry was escalating his aggressive campaign against Nvidia. Burry, who was portrayed by Christian Bale in “The Big Short,” is waging a war worth watching because he might actually win. This warning stands out from other predictions of an AI bubble because Burry now has a large audience and freedom from regulatory constraints. This positions him to potentially become the catalyst for the very collapse he forecasts. He is not only betting against the AI boom but is also actively trying to convince his followers that the emperor, Nvidia, has no clothes. The central question is whether Burry can generate enough doubt to seriously damage Nvidia and, by extension, other key players in the AI story like OpenAI.
Burry has intensified his efforts in recent weeks, publicly criticizing Nvidia and trading sharp comments with Palantir CEO Alex Karp. This feud began after regulatory filings showed Burry held bearish put options against both companies, a bet worth over one billion dollars that their stocks would crash. Karp appeared on CNBC and called Burry’s strategy crazy, to which Burry responded by mocking Karp for not understanding how to read an SEC filing. This exchange highlights the market’s fundamental divide: is AI a transformative technology justifying massive investment, or are we in a mania destined for a bad ending?
Burry’s allegations are specific and severe. He claims Nvidia’s stock-based compensation has cost shareholders one hundred twelve and a half billion dollars, effectively reducing owner’s earnings by fifty percent. He has also suggested that AI companies are manipulating their books by slow-walking depreciation on equipment that is rapidly losing value. Burry believes Nvidia’s customers are overstating the useful lives of its GPUs to justify runaway capital spending. Regarding customer demand, Burry has proposed it is a mirage, arguing that AI customers are funded by their dealers in a circular financing scheme.
Burry’s influence has grown enough that Nvidia felt compelled to respond directly, despite its strong recent earnings report. In a seven-page memo sent to Wall Street analysts, Nvidia’s investor relations team fired back. The company stated that Burry’s math is wrong, noting he incorrectly included RSU taxes and that the actual buyback figure is ninety-one billion dollars. Nvidia also asserted that its employee compensation is consistent with industry peers and firmly denied any comparison to Enron. Burry’s rebuttal was that he was not comparing Nvidia to Enron, but to Cisco from the late 1990s, a company that overbuilt unneeded infrastructure and saw its stock fall seventy-five percent.
This entire situation could seem insignificant by next Thanksgiving, or it could be prescient. Nvidia’s stock has increased twelvefold since early 2023, and the company now holds a four and a half trillion dollar market cap. Its rise to become the world’s most valuable company is unprecedented in speed. However, Burry’s track record is complicated. He correctly predicted the housing crisis, which brought him great acclaim. Since 2008, he has consistently predicted various market apocalypses, earning him the label of a permabear from critics. Followers who have listened to him with cult-like devotion have missed major bull markets. He bought GameStop early but sold before its meme stock explosion, and he lost a fortune shorting Tesla. After his successful housing call, frustrated investors left his fund due to extended underperformance.
Earlier this month, Burry deregistered his investment firm, Scion Asset Management, with the SEC. He explained the move was due to regulatory restrictions that he felt muzzled his ability to communicate. Last weekend, he launched a Substack newsletter to prosecute his case against the AI industrial complex. A yearly subscription costs four hundred dollars, and the publication is described as his sole focus, offering analysis and projections for stocks and markets. People are listening; the newsletter gained ninety thousand subscribers in less than a week.
This raises a deeply unsettling question. Is Burry a canary in the coal mine warning of an inevitable collapse? Or could his fame, his track record, his unrestricted voice, and his fast-growing audience actually trigger the very implosion he is predicting? History suggests this is not so far-fetched. Famous short seller Jim Chanos did not create Enron’s accounting fraud, but his high-profile criticism gave other investors permission to question the company and accelerated its downfall. Similarly, David Einhorn’s detailed takedown of Lehman Brothers’ accounting made investors more skeptical and may have hastened the loss of confidence that led to its collapse. In both cases, the underlying problems were real, but a credible critic with a platform created a self-fulfilling crisis of confidence.
If enough investors believe Burry about AI overbuilding, they will sell. That selling would validate his bearish thesis, prompting more investors to sell. Burry does not need to be right about every detail; he only needs to be persuasive enough to trigger a stampede. Looking at Nvidia’s stock performance in November, it is easy to conclude his warnings are having an effect. However, looking at its performance over the entire year, that conclusion is less obvious. What is clear is that Nvidia has everything to lose, including a massive market cap and its role as the most indispensable company of the AI age. Meanwhile, Burry has nothing to lose but his reputation, and he now has a new megaphone that he will likely use at full volume for the foreseeable future.