Michael Burry has doubled down on his critique of Nvidia and other AI giants, and revealed he's betting against both it and Palantir.
In a Tuesday post on his new Substack, the investor of "The Big Short" fame called out Nvidia's recent memo to Wall Street analysts, saying it was responding to claims he didn't make.
Burry, in a post titled "Unicorns and Cockroaches: Blessed Fraud," wrote that he couldn't believe Nvidia's responses had come from the world's most valuable public company. He said the document contained "one straw man after another" and the memo "almost reads like a hoax."
The market veteran, who recently closed his hedge fund to outside cash and turned his focus to writing, said he'd never suggested Nvidia was dragging out the depreciation of its property, plant, and equipment (PP&E), as it's primarily a chip designer with minimal capital expenditures, not a manufacturer.
"No one cares about Nvidia's own depreciation," he said. "One straw man burnt."
Burry also dismissed Nvidia's argument that its older-generation chips are still being used, saying his concern is that newer chips could become functionally obsolete between 2026 and 2028.
"I am looking forward because I see problems that are relevant to investors today," he wrote. "A second straw man burnt."
Burry added that Nvidia's rebuttal to him was "disingenuous on the face, and disappointing."
He disclosed in his latest post that he's placed wagers against the chipmaker and another AI darling: "I continue to own puts on Palantir and Nvidia, both of which will be discussed at another time."
Nvidia and Palantir didn't immediately respond to requests for comment on Burry's latest post.
The depreciation question
One of Burry's chief concerns is AI companies' depreciation accounting, or how quickly they're projecting their assets will decline in value and how much they'll be worth at the end of their useful life.
Companies can increase their short-term profits and the stated value of their assets by spreading those costs over five or six years, rather than three. But that could pave the way for hefty writedowns in the future, Burry wrote on Substack.
He also highlighted a recent interview with Microsoft CEO Satya Nadella, in which Nadella said he had slowed the company's data center buildout earlier this year because he was wary of overbuilding infrastructure to serve one generation of AI chips, as the next generation will have different power and cooling requirements.
"The hyperscalers have been systematically increasing the useful lives of chips and servers, for depreciation purposes, as they invest hundreds of billions of dollars in graphics chips with accelerating planned obsolescence," Burry wrote.
He hinted that between the memo and wider market reaction, his depreciation comments have sparked a bigger reaction than he anticipated: "I have been drawn into something much bigger than me."
Nvidia shares have slumped 14% from their November 3 high, as investors have grown more concerned that AI companies are overspending and overvalued.
A dramatic comeback
Burry shot to fame after his massive bet against the US housing bubble was immortalized in the book and movie "The Big Short." Known for his dire warnings about crashes and recessions, he returned to X after a two-year break in late October, making the case that AI stocks are in a bubble.
Burry's Scion Asset Management previously revealed on November 3, the same day as Palantir's third-quarter earnings, that it held bearish put options on both companies at the end of September.
Palantir CEO Alex Karp called the bets "batshit crazy" in a televised interview the next day, prompting Burry to post on X that he wasn't surprised Karp "couldn't crack a simple 13F."
In a subsequent X post, Burry said the Palantir puts were "done last month" and he was "on to much better things" ahead of his Substack's launch.
The earlier positions had a combined notional value of $1.1 billion, but Burry wrote in his latest Substack post that they only cost him around $10 million each.
Burry hasn't shared the thinking behind his Palantir wagers. Shares of the AI-powered data analysis company hit a high ahead of its earnings but have since fallen 20%. They've still risen 26-fold since the start of 2023, valuing Palantir at around $390 billion — nearly 90 times its projected $4.4 billion of revenue this year.
