The ongoing dispute between Nvidia and prominent investor Michael Burry is intensifying. Burry, famous for his role in the 'Big Short,' has taken to social media to criticize the AI investment surge, likening it to the 1990s dotcom bubble with Nvidia as a central figure.
In response, Nvidia privately issued a memo to analysts, addressing 'questions and claims we've received,' with Burry being the first named source. The seven-page document refutes many of Burry's assertions.
Burry responded on Substack, asserting, 'Nvidia emailed a memo to Wall Street sell side analysts to push back on my arguments on [stock-based compensation] and Depreciation ... I stand by my analysis. I am not claiming Nvidia is Enron. It is clearly Cisco.'
Burry highlights parallels between the current AI infrastructure surge and the late-1990s telecom buildout, emphasizing massive capital expenditures, elongated depreciation periods, and soaring valuations as indicators of repeating past mistakes.
The Nvidia memo, first reported by Barron's, addresses criticism of the company's stock-based compensation and stock buybacks. It states, 'NVIDIA repurchased $91B shares since 2018, not $112.5B; Mr. Burry appears to have incorrectly included RSU taxes.' Nvidia maintains that its compensation strategy aligns with industry standards and that employee benefits from rising stock prices do not indicate excessive initial equity grants.
The memo further counters Burry's depreciation claims, stating that Nvidia's graphics processing units have a true longevity of four to six years based on actual usage, contradicting critics who claim shorter lifespan estimates justify excessive spending.
Nvidia also rebuts Burry's 'circular financing' suggestion, asserting that its strategic investments are a minor part of revenue and that AI startups mainly garner funds from external investors.
Burry draws parallels with Cisco, suggesting Nvidia now holds a similar position as the critical hardware supplier during the late 1990s boom, referencing the immense AI infrastructure investments anticipated over the coming years. He warns of expected supply exceeding demand, as seen in early 2000s fiber capacity utilization.
Burry concludes, 'And once again there is a Cisco at the center of it all, with the picks and shovels for all and the expansive vision to go with it. Its name is Nvidia.'
— CNBC's Michael Bloom contributed reporting.