Michael Burry, the investor immortalized in The Big Short for predicting the subprime mortgage collapse, is raising fresh alarms about Nvidia (NVDA), the semiconductor giant at the heart of the artificial intelligence (AI) boom.
In a recent Substack post published Thursday, Burry argued that Nvidia’s latest financial disclosures reveal a buildup of supply commitments that resembles patterns seen at Cisco Systems (CSCO) during the final stages of the dot-com bubble. His warning centers on a dramatic rise in purchase obligations, a balance-sheet detail that he believes signals mounting internal risk rather than temporary external pressures.
According to Nvidia’s most recent earnings report, purchase obligations surged to $95.2 billion, up sharply from $16.1 billion just one year ago. When including other supply-related obligations (such as inventory and additional purchase agreements), the total approaches $117 billion. That figure nearly matches the company’s annual operating cash flow.
On the company’s fiscal fourth-quarter earnings call Wednesday, Chief Financial Officer Colette Kress acknowledged that inventory increased 8% from the prior quarter. She said Nvidia had “strategically secured inventory and capacity to meet beyond the next several quarters, further out in time than usual.”
To Burry, that language signals a fundamental shift in strategy.
He contends that Nvidia is committing to vast amounts of supply well before having full visibility into long-term demand. The result: more capital tied up in inventory and contractual obligations for longer durations.
“What is happening now is not temporary,” Burry wrote. “It is no export shock. It is not even external. This is coming from within the business plan.” He described the move as a deliberate effort to lock in supply chain capacity further into the future than Nvidia has ever done before.
Burry’s comparison to Cisco harkens back to 2000 and 2001, when the networking equipment maker aggressively secured supplier commitments in anticipation of sustained 50% annual growth. When enterprise technology spending abruptly cooled following the dot-com peak, Cisco was saddled with excess inventory and supply agreements it no longer needed.
The fallout was severe. Cisco ultimately wrote down billions of dollars in inventory and saw its stock price collapse alongside the broader tech sector.
“This is not business as usual. This is risk,” Burry said of Nvidia’s current posture.
The core of his concern is that today’s extraordinary AI-driven demand may not persist at the same pace indefinitely. Should enterprise AI spending moderate or competitive dynamics shift, Nvidia could find itself locked into supply commitments made under more optimistic assumptions.
Margin Cushion or Mirage?
To be sure, Nvidia’s financial profile differs meaningfully from Cisco’s at the height of the tech bubble. Nvidia’s gross margins now exceed 70%, well above Cisco’s levels two decades ago.
Burry acknowledged that higher profitability could provide some buffer in a downturn. However, he questioned how durable those margins would be if demand were to cool.
He suggested that current profitability has been amplified by extraordinary demand conditions and Nvidia’s ability to command premium pricing amid limited GPU supply. If the supply-demand balance shifts, pricing power, and therefore margins, could compress quickly.
“That type of margin would likely revert quickly with a shift in demand,” he wrote.
Nvidia shares fell nearly 4% in early trading Thursday following the earnings release, though the stock remains one of the defining winners of the AI era. On Friday, the decline has continued, with NVDA currently down nearly 3% to end the week. After explosive gains from 2023 through 2025, fueled by surging demand for AI chips following the debut of ChatGPT and other AI softwares, the stock is now down about 3% year-to-date.
The diverging views highlight a broader debate unfolding on Wall Street: whether Nvidia’s dominance in AI infrastructure represents the early innings of a long secular expansion, or a late-stage boom vulnerable to the classic cycle of overcommitment and excess capacity.
For Burry, the risk lies not in external shocks, but in internal confidence. And in his view, that confidence may look eerily familiar.
While the picture being painted might seem relatively bleak, Nvidia is still up 50% in the past 12 months. Many analysts continue to express confidence in the stock, and the main hyperscalers committing billions to AI only continue to commit more. Further, Nvidia CEO Jensen Huang continues to take press and media interviews, expressing confidence in the future of AI and Nvidia.
Of the 50 analysts Barchart tracks in coverage on Nvidia stock, 45 currently have NVDA at a “Strong Buy.” Only 1 has it at a “Strong Sell,” and 1 at “Neutral,” with the remaining giving it a “Buy” rating. The mean target price for Nvidia is an impressive $255, giving Nvidia 41% upside left over the next 12 months.
On the date of publication, Caleb Naysmith did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
