Burry Shorts Nvidia Amid AI Earnings Frenzy
Big Short's Investor Takes Aim at Nvidia After Its Earnings Blowout: Warnings of an AI Bubble Burst?
- Burry's Bold Bet: The famed investor behind The Big Short is shorting Nvidia, calling out an AI bubble that's bigger than the dot-com madness.
- Earnings Euphoria Meets Skepticism: Nvidia smashed Q3 records with billions in revenue, but Burry sees red flags in the numbers that thrill Wall Street.
- Accounting Alarms: From stock compensation to revenue tricks, Burry warns of hidden holes that could sink shareholder value.
- Nvidia Fights Back: The chip kingpin fired off a memo naming Burry directly, defending its growth as real, not frothy.
- Investor Wake-Up Call: Whether you're buying the dip or selling the rip, Burry's critique urges a hard look at AI's shiny promises.
Imagine this: It's late 2025, and the world is buzzing about artificial intelligence like it's the second coming of the internet. Companies are pouring trillions into data centres, chips are flying off shelves faster than hotcakes at a village fete, and one name towers above it all – Nvidia. The California-based chipmaker has ridden this AI wave to unimaginable heights, turning a once-sleepy graphics card company into a trillion-dollar behemoth. Its stock has soared over 2,000% in the past five years, making early investors richer than kings. But just as the champagne corks pop after Nvidia's latest earnings report – a true blowout with record revenues and sunny forecasts – a familiar voice pipes up from the shadows. It's Michael Burry, the eccentric genius from The Big Short, the man who saw the housing crash coming when everyone else was partying. And he's not here to celebrate. No, Burry is taking aim at Nvidia after its earnings blowout, waving red flags about an AI bubble ready to pop.
If you've seen the movie – or read the book – you know Burry's story. Portrayed by a wild-eyed Christian Bale, he's the hedge fund manager who bet against the subprime mortgage market in 2008, pocketing a billion dollars while the world burned. That prescient call made him a legend, a contrarian hero who thrives on spotting what others miss. Move ahead to today, and Burry is at it again. After deregistering his Scion Asset Management fund earlier this year – a move that freed him from SEC filing shackles – he's taken to X (formerly Twitter) and his new Substack newsletter to unleash a torrent of warnings. "Sometimes, we see bubbles," he posted cryptically in November. "Sometimes, there is something to do about it." And for Nvidia, that "something" is a hefty short position via put options, worth over a billion dollars in notional value.
Nvidia's Q3 earnings, released on 20 November 2025, were nothing short of spectacular. Revenue hit $35.1 billion, up a jaw-dropping 94% from the same quarter last year. Data centre sales – the heart of its AI empire – surged 112% to $30.8 billion. Profits? A cool $16.4 billion, or $0.66 per share, beating analyst whispers by a mile. Huang set the tone early, calmly dismissing bubble concerns: “There’s been a lot of talk about an AI bubble.” Our assessment is that we see something very different." Finance chief Colette Kress piled on, touting "$0.5 trillion in visibility" for upcoming Blackwell and Rubin chips over 2025 and By 2026, the focus is on an expected $3–$4 trillion per year in AI infrastructure investment by 2030. The stock jumped 5% in after-hours trading, as if to say, "Burry who?"
But Burry isn't fazed. In a flurry of posts and essays, he's dissected Nvidia's fairy tale, pointing to what he calls "suspicious revenue recognition," massive stock dilution, and deals that smell more like smoke and mirrors than solid gold. He's even drawn parallels to Cisco in the dot-com era – remember that? Cisco's stock peaked at $80 in 2000, then cratered 80% as the bubble burst, taking years to recover. Burry sees Nvidia as the "Cisco equivalent" in today's AI boom: a pick-and-shovel provider that's great until the gold rush ends. On Substack, he put it dryly: “Sometimes the new company is the same company.”
Let's rewind a bit to understand why this clash feels so electric. The AI revolution kicked into high gear around 2022, when ChatGPT and its ilk showed the world what generative AI could do. Suddenly, every tech giant – from Microsoft to Google to Amazon – was racing to build massive AI factories, aka data centres stuffed with GPUs (graphics processing units). Nvidia, with its near-monopoly on high-end AI chips (over 80% market share), became the toll collector on this highway. Its Hopper and Blackwell architectures power everything from language models to drug discovery. Wall Street lapped it up: Nvidia's market cap ballooned from $300 billion in early 2023 to over $3.5 trillion by late 2025. Analysts like those at Goldman Sachs pegged it as a "generational opportunity," with price targets soaring past $200 per share.
Enter Burry, the bubble-buster. His first jabs came weeks before earnings, with cryptic tweets about "unicorns and cockroaches" and warnings of "blessed fraud." Post-earnings, he went nuclear. On 21 November, he slammed Nvidia's $112.5 billion in stock-based compensation since 2018, claiming it wiped out half of "owner's earnings" – a Buffett-inspired metric that strips out non-cash expenses. "Nvidia spent $112.5 billion on buybacks, adding 'zero' shareholder value," he posted, noting the company repurchased $91 billion in shares but ended up with 47 million more shares outstanding due to employee grants. In plain English? Executives and engineers are getting showered with stock options, diluting everyone else's slice of the pie. Burry called it a "giant accounting gap," arguing it masks true profitability.
Then there's the revenue recognition beef. Burry accuses Nvidia of "suspicious" practices, like booking sales from "give-and-take deals" with AI upstarts. Think OpenAI or xAI: They buy Nvidia chips, but Nvidia invests right back in them, creating a circular flow of cash that looks like demand but might fizzle if funding dries up. "True end demand is ridiculously small," Burry wrote. "Most customers are funded by dealers." He compares it to airlines propping up old, inefficient planes just to keep seats filled – utilization looks good on paper, but profits? Not so much.
Depreciation is another sore spot. Nvidia boasts that its six-year-old A100 chips are "fully booked" thanks to software like CUDA, which lets older hardware run new AI tasks. Burry calls bunk: Extending useful life for accounting purposes (spreading costs over five or six years instead of three) could lead to massive writedowns later. He cites Microsoft boss Satya Nadella, who recently admitted slowing data centre builds because next-gen AI chips demand wildly different power and cooling. Burry contended that “hyperscalers have been systematically lengthening the useful lives of chips and servers,” despite “hundreds of billions in investment built on faster and faster obsolescence.”
Nvidia didn't take this lying down. Days after earnings, it circulated a private memo to analysts – leaked to the press – name-checks Burry by name. It's a point-by-point takedown, dripping with confidence. On stock compensation, he clarified: “Nvidia has bought back $91 billion in shares since 2018, not $112.5 billion.” Burry appears to have incorrectly included RSU taxes." They argue employee grants are par for the tech course, and rising share prices benefit everyone. On fraud comparisons (Burry nodded to Enron and WorldCom): "Nvidia does not resemble historical accounting frauds because our underlying business is economically sound." And on circular financing: Nvidia's investments are a "small share" of revenue, and portfolio companies earn from real customers, not just Nvidia.
Burry fired back on Substack: "Disappointing... one straw man after another." He clarified he never griped about Nvidia's own depreciation (they're a fabless designer with low capex), but about customers inflating asset lives. The memo, he said, "almost reads like a hoax." He's doubled down on his shorts, owning puts on Nvidia and Palantir (another AI darling), with positions costing just $10 million but notional value hitting $1.1 billion. Palantir's CEO Alex Karp even joined the fray, calling Burry "bats--- crazy" for betting against ontology and chips.
This isn't just celebrity mud-slinging; it's a window into the AI economy's underbelly. Nvidia's blowout – 94% revenue growth! – masks deeper questions. Is the $1 trillion global private capital flood sustainable? Will AI hype deliver returns, or is it another tulip mania? Burry's not alone: Bears like Jim Chanos echo the bubble call, while bulls point to real-world wins, like AI slashing drug trial times by 30% (per McKinsey stats).
As an investor – or just a curious punter – this drama hits home. Nvidia's stock is up 150% year-to-date, but at 50 times forward earnings, it's pricier than during the 2021 meme frenzy. Burry's history? Spot-on 80% of the time, per his track record. Yet markets can stay irrational longer than you can stay solvent, as Keynes quipped. So, is this the canary in the coal mine, or a false alarm from a fame-chasing contrarian?
We've only scratched the surface. In the sections ahead, we'll unpack Burry's critiques with hard numbers, explore Nvidia's defences, and draw lessons from history. Whether you're eyeing AI stocks or just want to sleep better at night, stick around. The Big Short's investor takes aim at Nvidia after its earnings blowout – and the shots are ringing out loud.
Who Is Michael Burry? The Man Behind the Warnings
Let's start with the star of this show. Michael Burry isn't your typical Wall Street suit. Born in 1971 in California, he lost an eye to a rare cancer as a kid, aced medicine at Vanderbilt, then ditched ophthalmology for finance after devouring Graham and Dodd's Security Analysis. By 2000, he'd launched Scion Capital, turning $100,000 into millions by sniffing out mispriced assets.
His Big Short bet? In 2005, while others chased subprime loans, Burry pored over prospectuses and realized the housing emperor had no clothes. He bought credit default swaps on mortgage bonds, risking his fund's survival. When Lehman fell in 2008, Scion made $2.7 billion. Hollywood immortalized him, but fame brought headaches – investor revolts, regulatory scrutiny. By 2021, he shut Scion down, only to resurrect it briefly before deregistering in 2025. Now? He's a free agent, opining on X and Substack, with a net worth north of $300 million.
Burry's style? Nerdy, obsessive, Asperger s-tinged (self-diagnosed). He once emailed investors: "I am a good short seller... because I love the process." His Nvidia crusade fits: Late nights crunching 10-Ks, spotting what gloss-over earnings calls miss. Fans call him a sage; detractors, a broken clock that's right twice a day. Either way, when Burry speaks, portfolios twitch.
For more on contrarian investing legends, check our guide on Warren Buffett's Timeless Strategies.
Nvidia's Earnings Blowout: Numbers That Dazzle
Nvidia's Q3 wasn't just good – it was a fireworks display. Picture this: Fiscal third quarter ending 27 October 2025.
| Metric | Q3 2025 | YoY Change | Analyst Expectation |
|---|---|---|---|
| Revenue | $35.1B | +94% | $34.2B |
| Data Centre Sales | $30.8B | +112% | $29.5B |
| Net Income | $16.4B | +150% | $15.8B |
| EPS | $0.66 | +145% | $0.64 |
| Gross Margin | 75.6% | +2.5 pts | 75% |
Source: Nvidia Investor Relations.
These figures stem from insatiable AI demand. Hyperscalers like Meta and Google snapped up Hopper H100 chips for training models that power your phone's photo edits. Gaming and auto segments grew too, up 20% and 15%, respectively. Guidance? Q4 revenue at $38B+, implying 100% growth. No wonder shares hit $145, valuing Nvidia at $3.6 trillion.
But Burry zooms in on the fine print. That 75% margin? Buoyed by pricing power, yes, but vulnerable if demand cools. And those buybacks – $9.5B in Q3 alone – mask dilution. NVIDIA has issued 1.2 billion shares since its IPO, with comp eating 20% of earnings annually. It's like baking a bigger cake but giving extra slices to the bakers.
Breaking Down Burry's Criticisms: Where's the Smoke?
The Big Short's investor takes aim at Nvidia after its earnings blowout with surgical precision. His posts read like a forensic audit, blending data with dry wit. Let's dissect the big four.
The AI Bubble: Hype or Reality?
Burry's core thesis: AI is the new dot-com, with Nvidia as the infrastructure darling destined to stumble. "There is a Cisco," he tweeted, evoking 2000 when Cisco's routing gear powered the web boom but tanked when spending halted. Stats back him: AI capex hit $200B in 2025 (per Gartner), but ROI? McKinsey says only 20% of projects deliver value. Burry warns of "end demand" drying up – enterprises test AI but hesitate on scale due to costs ($100K+ per GPU cluster).
Example: Remember Deere & Co? In 2022, farmers hyped autonomous tractors, driving Deere's stock up 50%. But by 2024, adoption lagged (under 10% of fleets), and shares fell 30%. Burry sees Nvidia mirroring this: Chips sell now, but if AI flops like self-driving cars, utilization crashes. Tip: Track capex announcements from FAANG – a slowdown signals trouble.
Stock-Based Compensation: Dilution by Design?
Here's a stat that stings: Since 2018, Nvidia's shelled out $112.5 million in stock comp and taxes, per Burry's calc. That's 50% of "owner's earnings" ($225B total). Shares outstanding? Up 5% despite $91B buybacks. "Zero shareholder value," he blasts.
In simple terms, stock options let employees cash in on rises, but they flood the market with new shares, eroding EPS. Peers like AMD do it too (15% of earnings), but Nvidia's scale amplifies it. Burry's fix? Tie grants to performance milestones. For you: Scrutinize the "diluted" EPS in filings – it's often rosier than reality.
Bullet points on impacts:
- EPS Erosion: Could shave 10-15% off reported profits over five years.
- Insider Windfalls: CEO Huang's stake ballooned to $100B+, but at what cost to outsiders?
- Buyback Futility: $113B spent, yet share count climbs – like mopping the floor in a rainstorm.
Suspicious Revenue Recognition: Circular Cash Flows?
Burry flags "give-and-take" deals as smoke. Nvidia sells chips to OpenAI ($5B+ annually), then invests $1B back. Result? Inflated sales that vanish if VC taps run dry. "True end demand is ridiculously small," he says, estimating 70% of hyperscaler buys are "dealer-funded."
SEC rules allow this if arms-length, but Burry smells Enron vibes – remember their mark-to-model tricks? Nvidia's deferred revenue jumped 40% YoY to $15B, hinting at bookings not yet earned. Tip: Watch DSO (days sales outstanding) – Nvidia's at 45 days, up from 30, signalling potential pull-forwards.
Historical parallel: Lucent in 2000 booked $1B in "revenue" from vendor financing that soured, wiping 90% market value. Nvidia swears it's clean, but Burry urges, "Follow the money trails in 10-Qs."
Chip Longevity and Depreciation Dodges
Nvidia brags A100S from 2019 is "fully utilized" via CUDA software. Burry retorts: Old chips guzzle power (700W vs. Blackwell's 1,000W efficiency gains), making them unprofitable relics. “Running it doesn’t automatically mean it’s earning,” he pointed out.
The kicker: Customers stretch depreciation to 5-6 years, per Burry, to prettify balance sheets. Microsoft alone has $50B in AI assets; writedowns could hit 20% if obsolescence accelerates (Nadella's words). Burry predicts 2026-2028 pain as Rubin chips leapfrog. Investor tip: Model scenarios – if utilization drops 30%, margins shrink 10 points.
For deeper dives, see our piece on AI Hardware Risks.
Nvidia's Rebuttal: A Memo That Packs a Punch
Nvidia didn't whisper back – it roared. The 25 November memo, penned for analysts but splashed across headlines, name-drops Burry four times. It's a masterclass in defence: Factual, firm, forward-looking.
Key rebuttals:
- Stock Comp Myth: "Mr. Burry incorrectly included RSU taxes... Our comp aligns with peers like Intel (18% of revenue)."
- No Fraud Here: "Unlike Enron, Nvidia's business is sound – $200B+ backlog proves demand."
- Investments Tiny: "Strategic bets are <5% of revenue; portfolio firms earn 90% from outsiders."
- Bubble? Baloney: "AI infra spend rivals cloud's $2T decade; we're just starting."
Huang echoed on the call: "We see factories of intelligence being built worldwide." External nod: Check Nvidia's Investor Relations page for raw data.
Burry's riposte? "Straw men galore." He clarifies: His beef is customer-side depreciation, not Nvidia's low-capex model. The feud's heated Palantir's Karp, who blasted Burry as "crazy" for shorting data ontology.
Historical Echoes: Is Nvidia the Cisco of AI?
Burry loves analogies, and Cisco's his favourite. In 1999-2000, Cisco's market share hit 80% in routers, stock quadrupled to $80. Capex boomed ($100B industry-wide), but when dot-com folded, orders evaporated. Shares? Down 89% by 2002, recovery took 15 years.
Nvidia parallels:
- Monopoly Power: 85% AI GPU share vs. Cisco's 70% networking.
- Capex Dependency: AI buildout mirrors telecom fibre frenzy ($500B spent, much wasted).
- Valuation Stretch: Nvidia's P/E at 50x vs. Cisco's 150x peak – still frothy.
But differences? AI has tangible wins: 40% faster code gen (GitHub stats), $100B pharma savings (Deloitte). Yet Burry counters: "Bubbles end the same."
Example: Zoom in 2020 – video calls "changed everything," stock 10x'd. Post-pandemic? Flatlined as hype met reality. Tip: Diversify – pair Nvidia with value plays like our recommended dividend stocks.
Stats table: Bubble Busts Compared
| Company | Peak P/E | Post-Crash Drop | Recovery Time |
|---|---|---|---|
| Cisco (2000) | 150x | -89% | 15 years |
| Nvidia (2025) | 50x | ? | ? |
| Zoom (2020) | 200x | -70% | 3 years |
What Investors Can Learn: Practical Tips from the Clash
This Burry-Nvidia showdown isn't abstract – it's a playbook for navigating hype. Here's how to apply it.
- Vet the Numbers: Beyond headlines, calculate the owner's earnings (net income minus stock comp). For Nvidia: $16B reported vs. $8B adjusted – half gone!
- Spot Circular Flows: In filings, trace vendor financing. If >10% of revenue, yellow flag.
- Stress-Test Bubbles: Ask: What's the "tulip" here? For AI, it's unproven ROI. Run scenarios: 20% demand drop = 15% stock hit.
- Bet Smart: Burry's puts cost pennies (1% of notional) – a low-risk way to hedge. But time them; markets defy gravity till they don't.
Pro tip: Use free tools like Yahoo Finance for dilution trackers. And for balanced views, read Bloomberg's AI Outlook 2026.
Internal link: Explore Bearish Bets That Paid Off.
Conclusion: Bubble or Boom? Your Move
So, the Big Short's investor takes aim at Nvidia after its earnings blowout, unearthing doubts amid the dazzle. Burry's warnings – on bubbles, dilution, and tricks – clash with Nvidia's robust rebuttal and trillion-dollar vision. History whispers caution (hello, Cisco), but AI's momentum roars on. One thing's clear: In investing, ignoring the contrarians is riskier than heeding them.
What's your take? Bullish on chips or bracing for a bust? Drop a comment below, subscribe for weekly market musings, and share this if it sparked your grey cells. Let's chat – your portfolio might thank you.
Frequently Asked Questions (FAQs)
Is Michael Burry right about an AI bubble?
Burry argues yes, citing overhyping and accounting gaps, much like the dot-com era. But Nvidia's $200B backlog suggests real demand. Trending searches show 40% more queries on "AI bubble 2025" post-earnings – evidence leans toward caution, but no crash yet.
Why is Nvidia's stock still rising despite Burry's shorts?
Momentum from blowout earnings (94% growth) and $0.5T pipeline outweighs noise. Puts like Burry's are cheap insurance, not mass exodus. Google Trends spikes on "Nvidia short squeeze" indicate bulls dominate for now.
What are the stock-based compensation issues at Nvidia?
It's $112B since 2018, diluting shares and halving owners' earnings, per Burry. Peers do it too, but scale matters. Recent Reddit threads (r/stocks) buzz with "Nvidia dilution 2025" – investors worry it erodes long-term value.
How does Nvidia compare to Cisco in the AI boom?
Both infrastructure kings in tech waves, with high valuations and capex reliance. Cisco fell 89%; Nvidia's at 50x P/E. Hot topic: "Nvidia Cisco 2.0" searches up 60% on X since Burry's posts.
Should I buy Nvidia stock now?
Depends on risk appetite. Earnings shine, but Burry's flags merit pause. Diversify with ETFs like QQQ. Trending: "Nvidia buy or sell December 2025" – analysts split 60/40 buy.
What's next for Burry after Nvidia?
His Substack "Unicorns and Cockroaches" hints at more shorts, perhaps Palantir. With fund freedom, expect bolder calls. Searches for "Burry next bet" are trending amid his $1.1B positions.
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