Nvidia Defends Valuation Against Michael Burry's AI Bubble Claims

Nvidia Corp. issued a seven-page memorandum to Wall Street analysts to refute allegations of accounting irregularities, circular financing, and the existence of an AI bubble. The company specifically targeted criticisms from investor Michael Burry, who placed put options exceeding $1 billion against Nvidia and Palantir. Burry alleged that Nvidia's revenue recognition is suspicious and compared the current AI infrastructure build-out to the dot-com bubble and the collapse of Cisco Systems.

In its rebuttal, Nvidia denied comparisons to frauds like Enron and WorldCom, asserting its business is economically sound and transparent. The company disputed Burry's claim that it repurchased $112.5 billion in shares since 2018, correcting the figure to $91 billion and attributing the error to Burry's inclusion of restricted stock unit taxes. Nvidia also rejected claims of circular financing—where a company funds its own customers to inflate sales—stating that its investments in firms like OpenAI and xAI are small relative to total revenue and that customers typically pay within 53 days.

Further disputes emerged over GPU depreciation. Burry argued that hardware becomes useless in two to three years, while Nvidia maintained that chips like the A100 retain value for four to six years. Despite defending its position and claiming demand remains off the charts, Nvidia conceded that its complex Blackwell chips face higher warranty costs and lower gross margins. These tensions coincided with Nvidia's market value falling from a $5 trillion peak in October to approximately $4.2 trillion by late November, exacerbated by reports that Meta Platforms was discussing using competing AI chips from Google.