The ongoing clash between Nvidia and prominent investor Michael Burry has intensified. Burry, known for his role in the 'Big Short,' has used social media to liken the current artificial intelligence investment trend to the 1990s dotcom bubble, with Nvidia as a focal point.
In response, Nvidia discreetly distributed a seven-page memo to analysts challenging Burry's assertions. The document opened with a refutation of claims sourced from 'Michael Burry on Twitter / X.' Burry responded via Substack, reaffirming his analysis on stock-based compensation and depreciation, stating, 'I am not claiming Nvidia is Enron. It is clearly Cisco.'
Burry has consistently warned that the AI infrastructure craze resembles the telecom buildout of the late 1990s rather than the well-remembered dot-com downturns. He highlights extensive capital expenditure plans, lengthy depreciation schedules, and skyrocketing valuations as signs of a market mistaking a supply boom for steadfast demand.
The memo, initially reported by Barron's, addresses Burry's critique of Nvidia's stock-based compensation dilution and stock buybacks. 'Nvidia repurchased $91 billion shares since 2018, not $112.5 billion; Mr. Burry appears to have incorrectly included RSU taxes,' it stated, referencing Restricted Stock Units. It dismissed the conflation of employee equity grants with repurchase program performance.
Furthermore, Nvidia contested Burry's depreciation claims, arguing that customers depreciate GPUs over four to six years, reflecting their practical longevity and usage. It emphasized that older GPUs like the A100s, launched in 2020, maintain high usage rates and significant economic value beyond critics' suggested timeframe.
The memo also denied Burry's 'circular financing' notion, asserting that Nvidia's strategic investments form a small revenue fraction and that AI startups largely raise funds externally.
On his Substack, Burry likened Nvidia's current role to Cisco's past influence during a massive investment cycle in 1999-2000, noting parallels in overbuilt supply and underestimated demand. In the early 2000s, less than 5% of U.S. fiber capacity was used, Burry noted, suggesting today's AI demands are also overestimated.
'And once again, there is a Cisco at the center, with the tools for all and a broad vision,' Burry wrote, 'Its name is Nvidia.'
— CNBC's Michael Bloom contributed to this report.