Michael Burry of “Big Short” fame has taken another jab at the artificial intelligence (AI) bubble by criticizing Nvidia’s (NVDA) earnings. The chip giant reported better-than-expected sales and earnings for its fiscal third quarter and gave an upbeat guidance for the fourth quarter, seemingly dismissing fears of overvaluation.
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However, Burry expressed doubts about the longevity of Nvidia’s chips, concerns about stock dilution, and skepticism about the compromises in AI-related agreements. Despite strong results, NVDA stock lost 4.1% over the past two days, following Burry’s comments.
Nvidia Rebuffs AI Bubble Claims
During the Q3 earnings call, Nvidia CFO Colette Kress stated that Nvidia’s CUDA software helps older chips run newer software and AI applications, extending the life of the company’s systems beyond expectations. She noted that A100 GPUs (graphics processing units) shipped six years ago are still fully utilized today, and all Nvidia GPU generations, including Blackwell, Hopper, and Ampere, are being fully utilized.
Kress projected revenues of $0.5 trillion from the Blackwell and Rubin GPU platforms in 2025 and 2026, and estimated annual AI infrastructure investments to reach between $3 trillion and $4 trillion by 2030. These figures reflect Nvidia’s strong confidence in sustained growth and demand for its AI technology and infrastructure.
Burry Targets Nvidia’s Chips
Following Nvidia’s management comments and optimistic outlook, Burry took aim at Nvidia’s chips on his X account. He noted that just because Nvidia’s customers are still using older chips, it does not imply from an accounting viewpoint that those chips have a longer “useful life.” Burry clarified that this mixes up how much something is physically used with whether it actually creates value or profit.
He compared Nvidia’s chip lifecycle to airlines keeping old planes for peak seasons even though those planes generate little profit or value. He added that Nvidia’s older chips, like the A100, use much more electricity than the newer ones (H100 chips), so customers who keep using the older chips are probably facing higher energy costs.
Burry Cautions Against Give-And-Take Deals
Burry also criticized the complex network of multi-billion-dollar “give-and-take” deals between Nvidia and other AI companies like OpenAI, Microsoft (MSFT), and Oracle (ORCL). He argued that the real end-customer demand is very small since most customers are actually funded by the companies they buy from, making the demand appear bigger than it really is.
This circular nature, where Nvidia sells chips to companies it has invested in, which in turn use funds from Nvidia, has drawn criticism from others who see these deals as artificially boosting sales figures.
Burry Calls Out Stock Dilution Issues
Burry highlighted that despite Nvidia repurchasing nearly $113 billion of its stock since 2018, there are 47 million more shares outstanding today. He explained that while Nvidia spent $20.5 billion on stock-based compensation (SBC), the actual cost of dilution was about $112.5 billion, effectively halving shareholder earnings.
In other words, Nvidia’s buybacks mainly offset SBC-related dilution rather than genuinely reducing shares, creating a misleading picture of earnings and potentially deceiving long-term investors.
Is NVDA Stock a Buy?
Despite Burry’s criticism, analysts remain optimistic about Nvidia’s long-term outlook. On TipRanks, NVDA stock has a Strong Buy consensus rating based on 39 Buys, one Hold, and one Sell rating. The average Nvidia price target of $257.33 implies 43.9% upside potential from current levels. Year-to-date, NVDA stock has surged 33.2%.
