On time performance! "Big Short" battles NVIDIA, the "AI bubble" debate begins

“This time there is nothing different, no matter how many people try to prove otherwise. Once again, there is a Cisco at the center of it all, providing 'picks and shovels' for everyone, accompanied by a grand vision. Its name is NVIDIA.”

After the farce of fund cancellations and the media exaggerating the "short interest in AI by a hundredfold," the prototype of the movie "The Big Short," well-known investor Michael Burry, fulfilled his promise and made a timely "return" on November 24 local time.

This time, he did not short the market through massive options as rumored, but chose to express his views on "shorting AI" through his first column titled "The Cardinal Sign of a Bubble: Supply-Side Gluttony."

In this article, Burry officially declared war on the current AI craze, with NVIDIA at the center of the storm. He pointed out that NVIDIA is the Cisco of that time.

Core Argument: NVIDIA is the Cisco of That Time

In response to the recent market view that "tech giants have strong profitability, so there is no bubble," Burry sharply countered in his article. He cited data from the peak of the internet bubble in 1999, pointing out that the prosperity of that time was also driven by high-profit companies, not just those small websites that had no revenue.

He wrote in the article:

“It is not driven by unprofitable internet companies as people think; the strong Nasdaq index in 1999 was propelled into the new century by high-profit large-cap stocks of that time, including the 'Four Horsemen'—Microsoft, Intel, Dell, and Cisco…”

Burry believes history is rhyming. The current AI boom is dominated by the "Five Public Knights"—Microsoft, Google, Meta, Amazon, and Oracle, along with startups like OpenAI. These companies promise to invest nearly $3 trillion in AI infrastructure over the next three years.

At the core of all this, Burry sees the shadow of Cisco from back then— as the infrastructure supplier for network construction, Cisco's stock price plummeted over 75% after the bubble burst. He stated in the article:

“Once again, there is a Cisco at the center of it all, providing 'picks and shovels' for everyone, accompanied by a grand vision. Its name is NVIDIA.”

Nature of the Bubble: Supply-Side "Gluttony"

In a preview on November 11, Burry had previously accused tech companies of artificially inflating profits by extending depreciation periods.

Wallstreetcn mentioned that on November 11, Burry pointed out on social media that the actual lifespan of AI chips and other equipment is only 2-3 years, but some companies have extended the depreciation period to 6 years He expects that from 2026 to 2028, large technology companies will inflate profits by $176 billion due to underestimated depreciation. He specifically pointed out that by 2028, Oracle's profits could be exaggerated by 26.9%, while Meta's profits could be exaggerated by 20.8%. He also promised to disclose more details on November 25.

In his latest published article, he further deepened this view, defining it as "supply-side gluttony."

Burry pointed out in the article that the key issue of the current AI boom is “catastrophically overbuilt supply and nowhere near enough demand.”

He believes that tech giants are engaged in an unsustainable capital expenditure spree, pouring astronomical amounts of money into building data centers and purchasing chips, while the actual revenue generated from downstream applications is far from covering these costs.

Burry warned investors not to be misled by the so-called "this time is different," writing in the article:

“No matter how many people try to prove that this time is different.”

Competitor's Response: Jensen Huang's View of a "Different Scene"

In the face of Burry's continuous questioning and the market's discussion about the "AI bubble," NVIDIA, at the center of the storm, did not back down.

According to Bloomberg, NVIDIA recently sent a memo to Wall Street analysts rebutting Burry's previous accusations regarding its compensation dilution and buyback issues. NVIDIA CEO Jensen Huang also directly responded to the "bubble theory" after the earnings report last week:

“There is a lot of discussion about the AI bubble,” Huang said, “but from our vantage point, we see something very different.”

Similarly, Burry remains firmly bearish on AI; despite NVIDIA opposing his views, he insists on expressing them.

“Cassandra Unchained”: The Shift from Fund Manager to Analyst

This intense analysis was published in Burry's newly launched paid column "Cassandra Unchained," with an annual fee of $379. "The Major Signs of a Bubble: Supply-Side Gluttony" is the first article in the column.

After rumors of previously liquidating his fund, Burry explained on the column's "About" page why he abandoned fund management to become a full-time writer. He stated that in the past, while managing client funds:

Professionally managing funds comes with regulatory and compliance restrictions, which has effectively muzzled my ability to express myself. These limitations mean that I can only publicly share obscure snippets.

He stated that now "all of that is over." Just as Warren Buffett once referred to him as "Cassandra" during a congressional hearing, his current state is "Cassandra is unchained," implying that he will share his observations on market bubbles without reservation. "Cassandra" refers to the priestess in Greek mythology who accurately predicted but was not believed.

Wallstreetcn reported that in November this year, after being exposed by the media for "heavily betting against AI leaders," Michael Burry personally refuted claims that the media's report of "a $912 million short position on NVIDIA and Palantir" was grossly exaggerated, with the actual investment being only $9.2 million—a difference of one hundred times. Burry pointed out that the media mistakenly took the nominal exposure disclosed by the SEC as the scale of funds. More notably, he quietly dissolved his fund Scion Asset Management and announced that he would launch a new project on November 25.

Epilogue: The Unpopular Prophet?

It should be noted that although Burry was previously misreported by the media to hold a "nearly $1 billion" short position on NVIDIA (which actually had a nominal value of only $9.2 million and had partially been closed), this has not changed his determination to be bearish on the macro logic of AI.

At the end of the first article, Burry quoted a saying from Buffett's longtime partner Charlie Munger, seemingly to annotate the role he currently plays:

"If you go around popping a lot of balloons, you are not going to be the most popular fellow in the room."