Prominent investor Michael Burry initiated a long position in Nvidia shares, arguing the chipmaker remains fundamentally undervalued despite closing his hedge fund due to broader bubble concerns.
Despite shuttering his hedge fund amid fears of an artificial intelligence bubble, legendary investor Michael Burry has taken a long position in Nvidia, calling the chipmaker “wildly undervalued.” Holding multiple short positions in major tech firms including Oracle and Palantir Technologies, Burry highlighted the apparent contradiction in a Wednesday Substack post published hours before Nvidia released blockbuster fiscal second-quarter results. He pointed to the company’s “low price-to-earnings ratio for a big grower that currently commands monopoly rents,” noting that he purchased Nvidia call options with strike prices in the mid-to-high $200s. He characterized the trade strictly as a “hedge,” explaining that while the premiums on those calls are considerable, they are “entirely offset” by his existing short positions. “I am not playing for gains here,” he added.
Nvidia projects it could generate more than $100 billion in revenue next quarter as demand for AI infrastructure continues to outstrip supply. Burry, who famously predicted the 2008 global financial crisis, closed his Scion Asset Management hedge fund last year, stating that prevailing market fundamentals no longer aligned with his investment philosophy.
Since then, Burry has consistently cautioned about an impending AI bubble, alleging that leading U.S. megacap technology firms employ accounting maneuvers to artificially inflate their balance sheets and undervalue GPU depreciation. He previously argued that “understating depreciation by extending the useful life of assets artificially boosts earnings,” labeling the practice “one of the more common frauds of the modern era.” Burry has also flagged mounting leverage risks stemming from off-balance-sheet commitments across the tech sector, warning that several companies carry long-term lease obligations that exceed their current sales trajectories.
His scrutiny extends to hyperscalers purchasing Nvidia chips, which he argues should not be extending the useful lives of computing equipment that typically operates on a two- to three-year product cycle. Burry forecasts that these data center operators will understate depreciation by $176 billion between 2026 and 2028. He specifically projects that Oracle will overstate earnings by 26.9% and Meta by 20.8% by 2028.
Following a second quarter in which Nvidia returned $26 billion to shareholders through buybacks and cash dividends, Burry noted the company is now redirecting capital toward infrastructure buildouts and partner growth. However, he warned that Nvidia’s strategy of investing “into and through the top of the bubble” may result in “shocking reductions in earnings” not terribly far into the future.
In a separate Substack analysis, Burry detailed how major players like Nvidia and Elon Musk’s xAI are utilizing GPU-backed securities structures to finance expanding AI data centers, raising concerns about the safety of American retirement savings. He outlined the financial pipeline channeling retiree funds into Musk’s AI operations without investors’ knowledge, dismissing such arrangements as “fugazi”—his term for fraudulent schemes.