This Thanksgiving’s real drama may be Michael Burry versus Nvidia

While you’re worrying about the details this Thanksgiving, famed investor Michael Burry – the one played by Christian Bale in “The Big Short” – is waging an increasingly aggressive war against Nvidia.

It’s a battle worth watching because Burry just might win it. What makes this different from every other warning about an AI bubble is that Burry now has the audience and the freedom from legal restrictions to potentially become the catalyst for the collapse he predicts. He’s betting against the AI ​​boom, but he’s also proactively trying to convince his growing number of followers that the emperor – Nvidia – has no clothes. What everyone is wondering now is whether Burry can sow enough doubt to really hinder Nvidia and, by extension, the other main characters in this story, including OpenAI.

Burry has really put himself at his best in recent weeks. He throws mud at Nvidia; he also exchanged nasty comments with Palantir CEO Alex Karp after regulatory filings showed Burry had bearish put options on both companies — a bet that was more than worth it $1 billion that they would crash. (Karp went on CNBC and called Burry’s strategy “crap crazy”, to which Burry responded with mocking Karp (Because you don’t understand how to read an SEC filing.) The argument encapsulates the market’s central divide: Is AI going to transform everything and thus be worth every billion invested, or are we now in a mania zone destined to end badly?

Burry’s accusations are specific and damning. He says Nvidia’s stock-based compensation cost shareholders $112.5 billion, cutting owner profits by 50%. He has suggested that AI companies are cooking their books through slow depreciation on equipment that is rapidly losing value. (Burry believes that Nvidia customers are overestimating the useful life of Nvidia’s GPUs to justify runaway capital expenditures.) As for all that customer demand, Burry has essentially suggested that it’s a mirage, because AI customers are “financed by their dealers” in a circular financing system.

There are enough people citing Burry that despite last week’s huge earnings report, Nvidia recently felt compelled to respond. In a seven-page memo sent to Wall Street analysts last weekend by Nvidia’s investor relations team – a development first reported by Barron’s — the company fired back, saying Burry’s calculation was wrong, in part because he “misrecorded the RSU taxes” (the actual buyback amount is $91 billion, not $112.5 billion, the memo says). Nvidia’s employee compensation is also “consistent with comparable companies.” And Nvidia is absolutely, absolutely, not Enron, thank you very much.

Burries answerin a nutshell: I didn’t compare Nvidia to Enron. I compare Nvidia to Cisco around the late 1990s, when it overbuilt infrastructure that no one really needed at the time and the stock crashed 75% when everyone realized it.

This could all look like a storm in a teapot by Thanksgiving next year – or not! Nvidia shares have risen twelvefold since the start of 2023. The company’s market capitalization currently stands at $4.5 trillion. The company’s evolution into the most valuable company in the world is happening faster than anything the market has ever seen. But Burry has a complicated track record. He mentioned the housing crisis, which won him a lot of support. But since 2008, he has been predicting various apocalypses almost continuously, earning him the label of “permabear” from critics, while people who listen to him with a kind of cult-like devotion have missed some of the biggest bull runs in market history. For example, Burry smartly bought GameStop early, but then sold his shares before the meme stock boom. He shorted Tesla and lost a fortune. After his call for the smart home crisis, frustrated investors essentially fled his fund due to prolonged underperformance.

Earlier this month, Burry deregistered his investment firm, Scion Asset Management, from the SEC. He said this was due to “regulatory and compliance restrictions that effectively limited my ability to communicate”, explaining that he was frustrated seeing people misinterpret his tweets on

Last weekend he launched a Substack called “Cassandra unleashedwhich he now uses to prosecute his case against the entire AI industrial complex. The description for the newsletter, an annual subscription that costs $400, is that it is now Burry’s “sole focus as he gives you a front-row seat to his analytical efforts and projections for stocks, markets and bubbles, often with an eye to history and its remarkably timeless patterns.”

People are definitely listening. The newsletter was launched less than a week ago and already has 90,000 subscribers. Which brings us to the truly disturbing question hanging over all of this: Is Burry the canary in the coal mine, warning of an inevitable collapse? Or can his fame, his track record, his now unlimited voice and a burgeoning audience cause exactly the implosion he predicts?

History shows that this is not surprising. Jim Chanos, the famed short seller, did not cause Enron’s accounting fraud, but his high-profile criticism in 2000 and 2001 gave other investors permission to question the company and accelerated its unraveling. Prominent hedge fund manager David Einhorn’s detailed analysis of Lehman Brothers’ accounting tricks at a 2008 conference made other investors more skeptical and may have hastened the loss of confidence that led to the 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 in the AI ​​overbuild, they will sell. The selling will validate his bearish thesis. More investors will sell. Burry doesn’t have to be right in every detail; he just needs to be convincing enough to start the rush. Looking at Nvidia’s performance in November, it’s easy to conclude that Burry’s warnings hold up; Given the performance of the shares over the year, it is less obvious that this is the case.

What’s much clearer is that Nvidia has everything to lose, including an almost astonishingly enormous market cap and its position as the most indispensable company of the AI ​​era. Meanwhile, Burry has nothing to lose but his reputation and a new megaphone that he will likely be using at full volume for the foreseeable future.