Michael Burry flags “troubling” jump in Nvidia’s supply commitments
“The Big Short” investor Michael Burry — famous for betting against the 2008 housing bubble — just warned of a major risk in Nvidia’s latest annual report, pointing to a sixfold surge in purchase obligations over the past year.
In a Substack post Thursday, Burry called the increase from $16.1 billion to $95.2 billion in just 12 months “troubling,” noting that Nvidia has been forced to place noncancelable purchase orders well before knowing the final demand for its AI chips. The surge is partly tied to supplier TSMC requiring longer-term contracts, he added.
Nvidia’s total supply obligations now stand at $117 billion, nearly matching its annual operating cash flow. Burry wrote this is “not business as usual,” warning the company could face a severe earnings hit by being locked in to massive spending commitments.
Burry compared the situation to Cisco during the dot-com bubble, when the company extended supply commitments in anticipation of 50% annual growth — only to later write down roughly 40% of its supply chain obligations and inventory after demand collapsed and the stock plunged.
Separately, he also argued Nvidia’s high profit margins are partly driven by extreme demand and pricing power, cautioning that any downturn could prove “catastrophic” for its earnings and balance sheet.
Back in November, Burry disclosed option bets against Nvidia and Palantir after warning of market “bubbles.” Huang brushed off those concerns at the time, saying the AI infrastructure build-out is still in its early stages and “we’re a long, long ways” from a downturn.
Unsurprisingly for Burry, his thoughts on supply commitments are out of consensus. Most on Wall Street are applauding Nvidia’s ability to source supplies in a world where demand for AI infrastructure outstrips the ability to deliver it.
“Supply commitments are over 3x YoY to $95 billion, ensuring NVDA may well be the most dependable supplier that can serve the AI market that we believe could double towards $1.4 trillion in the next few years,” wrote Bank of America analyst Vivek Arya.
“Demand is showing absolutely zero signs of slowing, suggesting to us that despite fears a peak does not look imminent, quite the opposite in fact,” Bernstein analyst Stacy Rasgon wrote. “And NVDA appears extremely well positioned to satisfy that demand given their recent supply chain actions (we wonder if there will be any HBM left for anyone else...).”
Nvidia’s total supply obligations now stand at $117 billion, nearly matching its annual operating cash flow. Burry wrote this is “not business as usual,” warning the company could face a severe earnings hit by being locked in to massive spending commitments.
Burry compared the situation to Cisco during the dot-com bubble, when the company extended supply commitments in anticipation of 50% annual growth — only to later write down roughly 40% of its supply chain obligations and inventory after demand collapsed and the stock plunged.
Separately, he also argued Nvidia’s high profit margins are partly driven by extreme demand and pricing power, cautioning that any downturn could prove “catastrophic” for its earnings and balance sheet.
Back in November, Burry disclosed option bets against Nvidia and Palantir after warning of market “bubbles.” Huang brushed off those concerns at the time, saying the AI infrastructure build-out is still in its early stages and “we’re a long, long ways” from a downturn.
Unsurprisingly for Burry, his thoughts on supply commitments are out of consensus. Most on Wall Street are applauding Nvidia’s ability to source supplies in a world where demand for AI infrastructure outstrips the ability to deliver it.
“Supply commitments are over 3x YoY to $95 billion, ensuring NVDA may well be the most dependable supplier that can serve the AI market that we believe could double towards $1.4 trillion in the next few years,” wrote Bank of America analyst Vivek Arya.
“Demand is showing absolutely zero signs of slowing, suggesting to us that despite fears a peak does not look imminent, quite the opposite in fact,” Bernstein analyst Stacy Rasgon wrote. “And NVDA appears extremely well positioned to satisfy that demand given their recent supply chain actions (we wonder if there will be any HBM left for anyone else...).”
