Andrew Toth | FilmMagic | Getty Images
The combat betwixt Nvidia and 1 of its loudest naysayers, capitalist Michael Burry, is escalating.
Following the "Big Short" investor's bid of societal media posts arguing that the artificial quality concern roar is replaying the dotcom bubble from the 1990s, with Nvidia astatine the halfway of it, the chipmaker softly circulated a backstage memo to analysts that explicitly namechecked Burry to propulsion backmost connected galore of his claims.
"Nvidia emailed a memo to Wall Street merchantability broadside analysts to propulsion backmost connected my arguments connected SBC and Depreciation. I basal by my analysis," Burry said successful a station connected Substack, referring to stock-based compensation. "I americium not claiming Nvidia is Enron. It is intelligibly Cisco."
Burry has repeatedly warned that today's AI infrastructure frenzy mirrors the late-1990s telecom buildout acold much than the dot-com wipeouts investors remember. He pointed to monolithic capex plans, extended depreciation schedules and soaring valuations arsenic grounds that markets are again mistaking a proviso roar for durable demand.
The Nvidia memo, archetypal reported by Barron's, disputed Burry's claims astir depreciation life.
To Burry's complaint that customers are overstating the utile lives of Nvidia's Graphics Processing Units successful bid to warrant runaway capex, Nvidia counters that its customers depreciate GPUs implicit 4 to six years based connected real-world longevity and utilization patterns.
Nvidia added that older GPUs specified arsenic A100s (released successful 2020) proceed to tally astatine precocious utilization rates and clasp meaningful economical worth good beyond the 2 to 3 years claimed by critics.
The memo besides rejects Burry's proposition of "circular financing," saying Nvidia's strategical investments correspond a tiny fraction of gross and that AI start-ups rise superior predominantly from extracurricular investors.
Today's Cisco
Burry believes Nvidia present occupies the nonstop aforesaid presumption arsenic Cisco, the cardinal hardware supplier that powered a monolithic superior concern cycle, held successful 1999–2000.
Just arsenic telecommunication companies spent tens of billions of dollars laying fibre optic cablegram and buying Cisco cogwheel based connected forecasts that "internet postulation doubles each 100 days," today's hyperscalers are promising astir $3 trillion successful AI infrastructure spending implicit the adjacent 3 years, Burry said successful a Substack newsletter.
The bosom of his Cisco analogy is overbuilt proviso gathering acold little request than expected. In the aboriginal 2000s, little than 5% of U.S. fibre capableness was operational, Burry said. Today, helium believes the industry's content successful boundless AI request rests connected likewise optimistic assumptions astir information halfway powerfulness and GPU longevity.
"And erstwhile again determination is simply a Cisco astatine the halfway of it all, with the picks and shovels for each and the expansive imaginativeness to spell with it. Its sanction is Nvidia," Burry wrote.
— CNBC's Michael Bloom contributed reporting.
English (US) ·