Michael Burry, the investor known for his prescient warnings during the 2008 financial crisis, has recently turned his focus to the burgeoning artificial intelligence (AI) market, particularly targeting Nvidia, a leading player in the sector. Burry’s critiques, which have emerged over the past two years, highlight concerns about the underlying economics of AI technologies, questioning whether the current enthusiasm is sustainable or merely speculative.
The clash between Burry and Nvidia escalated through a series of regulatory filings and public statements, culminating in a notable exchange that reverberated through financial newsrooms and investor forums. Burry’s warnings are not limited to Nvidia alone; however, given Nvidia’s pivotal position in the AI landscape, it has become a central figure in the debate surrounding AI’s economic viability.
In 2023 and 2024, Burry cautioned investors about excessive optimism in the tech sector without specifically naming Nvidia. By late 2024, his firm, Scion Asset Management, had acquired large put options tied to Nvidia and Palantir, signaling a significant bet against the AI rally. This move drew attention and speculation, particularly when Scion’s Q3 2025 filing revealed more than a billion dollars in notional puts across both companies, framing it as a direct challenge to the prevailing narrative surrounding AI’s growth.
Burry’s arguments, articulated in November 2025, centered on what he perceives as fundamental flaws in the understanding of AI economics. A significant aspect of his critique focuses on the depreciation schedules of AI hardware. He argues that advanced graphics processing units (GPUs), essential for AI applications, are often depreciated over several years, which he believes misrepresents their actual economic life. Burry contends that these chips become outdated much more quickly, estimating a realistic useful life of around three years instead of the longer periods currently used for accounting purposes.
This difference in depreciation timelines has substantial implications. Longer depreciation reduces the reported costs and artificially inflates earnings in the short term, while shorter schedules could reveal thinner margins for companies heavily investing in AI. Burry’s analysis suggests that discrepancies between reported earnings and the actual economic reality may become evident by 2026–2028, potentially leading to significant write-downs for many firms relying on Nvidia’s technology.
Furthermore, Burry delves into the motivations driving corporate investment in AI. He posits that many companies are not merely pursuing innovation for the sake of returns but are rather operating under the pressure of being left behind in a rapidly evolving technological landscape. This “fear of missing out” could lead to accelerated spending decisions that may not align with long-term economic benefits. Nvidia has benefited from this heightened demand, but Burry questions the sustainability of such enthusiasm when economic conditions inevitably tighten.
Another controversial aspect of Burry’s warnings involves the possibility of vendor financing within the AI ecosystem. Analysts, including prominent figures like Jim Chanos, have raised concerns that some companies may artificially inflate demand through financing structures that prop up current sales. Nvidia has firmly denied engaging in such practices, asserting that its demand stems from genuine, independent purchasing decisions.
Burry has also scrutinized Nvidia’s use of stock-based compensation as a potential factor diluting long-term shareholder value. He argues that while this practice is common in tech, it complicates the assessment of “owner earnings,” suggesting that shareholders may not receive as much economic value as the reported figures would imply. Nvidia defends its compensation policies as standard practice and compliant with industry norms, but the debate underscores a growing investor demand for transparency regarding long-term economic returns.
In a provocative analogy, Burry compares Nvidia not to fraudulent companies of the past but to Cisco during the dot-com era. Cisco was a legitimate entity with real revenue and innovation, yet its valuation soared to unsustainable levels, leading to a severe decline when the market cooled. Nvidia rejects this comparison, asserting that its demand is broad and supported across various sectors, but the crux of the disagreement remains whether this demand can endure when capital expenditures contract.
The public exchange became particularly pronounced when Nvidia responded to Burry’s critiques with an internal memo, directly addressing his concerns about accounting and vendor financing. In turn, Burry countered that Nvidia misrepresented his arguments, asserting that his primary focus was on the buyers of AI hardware rather than the company’s internal practices. This unusual confrontation between a single investor and a multi-trillion-dollar corporation not only highlighted Burry’s skepticism but also underscored a growing scrutiny of the AI industry’s financial foundations.
Burry’s sizable put positions signal a strong conviction regarding his outlook, with notional exposure exceeding a billion dollars. This significant bet on a potential decline invites further attention from investors and analysts, as they await developments that could validate or undermine his arguments.
The ongoing debate poses critical questions about the durability of AI capital spending and the broader implications for the market. If depreciation schedules tighten or financing conditions shift, the ripple effects could impact not only Nvidia but the entire AI sector. Investors are closely monitoring the decisions of hyperscalers regarding useful life assessments and write-downs, as these will be telling indicators of the industry’s economic health.
The clash between Burry and Nvidia transcends a mere valuation dispute, symbolizing the tension between rapid technological advancement and the financial realities that underpin it. As AI continues to reshape industries like fintech, health care, and manufacturing, the need for robust accounting practices and clear financial incentives becomes increasingly critical. Ultimately, the market will determine whether Burry’s cautionary stance or Nvidia’s optimistic narrative prevails in the evolving AI landscape.
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