"The Big Short" Burry: NVIDIA's Earnings Next Week Will Be "Excellent," But Bulls Should Seize the Opportunity to Exit

According to Zhitong Finance APP, Michael Burry, known as "The Big Short," expects NVIDIA's (NVDA.US) upcoming earnings report to be "excellent," but he urges bulls to "exit." The investor, famous for accurately predicting the 2008 subprime mortgage crisis, warned that the crisis surrounding CEO Jensen Huang could threaten the financing arrangements and customer transactions supporting NVIDIA's growth. Furthermore, leadership uncertainty, rising customer bargaining power, and regulatory risks could slow the company's growth and put pressure on profit margins.

Burry: Expects NVIDIA's Performance to Be "Excellent," But Bulls Should Exit

Burry anticipates strong results in NVIDIA's earnings report next week, reasoning that any shock related to the Jensen Huang crisis will take time to appear in the financial statements. "The quarterly earnings report, to be released in less than a week, is already set in stone and will be excellent," he stated. "Everything is in place; all terms and structures have been finalized. It will take time to unravel this intricate web."

However, he believes this earnings report provides another excellent opportunity for bulls to sell. "NVIDIA bulls will have another great chance to exit. Get out now." NVIDIA is scheduled to release its quarterly earnings for the period ending October 25 next week. The company previously forecasted revenue of $108 billion, plus or minus 2%, with a gross margin of approximately 74%.

According to Koyfin data, the market expects NVIDIA's revenue to increase by 13% quarter-over-quarter to $109.01 billion, adjusted earnings per share (EPS) to rise by 11% to $2.47, and EBITDA to grow by 12% to $73.08 billion. According to Fiscal AI data, revenue is expected to nearly double year-over-year to $108.4 billion, EPS is projected to rise from $1.25 to $2.46, and EBITDA is expected to increase from $37.35 billion to $72.9 billion.

Uncertainty Remains Over Jensen Huang's Succession

NVIDIA's board of directors launched an independent investigation this week to determine whether foreign intelligence agencies targeted Jensen Huang. However, the directors expressed their support for him, stating there was no reason to believe that company secrets or U.S. national security had been compromised. Yet, reports indicate that as of Wednesday, following the exposure of two extramarital affair scandals, the board was meeting to consider removing Jensen Huang.

Burry attributed NVIDIA's alleged pressure on customers to Jensen Huang. "'The Godfather' has fallen. Similarly, a protection racket system loses its enforcer in the black leather jacket," he said. "This coercion appears to come from the top."

He also questioned whether Chief Financial Officer Colette Kress could 胜任 Jensen Huang's role. Kress is seen as one of the potential interim successors. "I do not believe Colette or any new CEO can perfectly replace Jensen Huang," he stated. Burry believes that replacing Jensen Huang also means losing his influence over customers. "'The Godfather' was the enforcer, and NVIDIA will lose both."

Burry stated that leadership uncertainty exacerbates his concerns about NVIDIA's financing and sales methods. "Key person risk at NVIDIA has always been a concern," he said. "If only that were the only issue."

AI Capital Flows May Face Slowdown

Burry warned that NVIDIA's investments in companies purchasing its chips could make sales vulnerable when funding slows. "The deal terms and financing structures are the secret weapons that supercharge an already dominant technology," he said.

In the six months ended July 26, NVIDIA purchased $42.4 billion in equity securities. In August, it announced preliminary partnerships with six financial groups, including Apollo and Blackstone, aiming to raise over $500 billion for AI infrastructure over time.

Burry pointed out the high leverage throughout the system. "The entire system is heavily leveraged—I found it to be as high as 76 times," he said. He expects NVIDIA's board to control risks while addressing the leadership crisis, which could slow the flow of funds to customers. "The threat facing NVIDIA and its AI ecosystem is that cash flows could be disrupted. New investments will be more cautious, or may not happen at all. Asset write-downs could even occur."

Customer Resistance Could Squeeze Margins

Burry claims that NVIDIA forced customers to buy chips before their data centers were ready by threatening to reduce future allocations, resulting in unused equipment piling up in warehouses without depreciation. "The fall of 'The Godfather' gives customers an excuse to slow down transactions, bargain, renegotiate terms, or simply switch to competitors without fear of offending NVIDIA executives," he said.

He added that antitrust scrutiny could make maintaining this pressure more difficult, exposing the gap between NVIDIA's rapid GPU releases and the time customers need to build data centers. "NVIDIA's business will not disappear, but its growth may slow, and crucially, its margins may decline."

Burry stated that if NVIDIA reduces its reliance on these financing and sales arrangements, its technology would provide greater protection. "Without all this, the company with the software and hardware duopoly would be relatively more resilient to the CEO's misconduct," he said. "Unfortunately, that is not the case for NVIDIA."

Rising Regulatory Risks for NVIDIA

Even before the board crisis, the U.S. Department of Justice was reviewing NVIDIA's investment and sales practices. Burry expects these issues, along with chip sales to China, to face a new round of scrutiny. Earlier this week, he stated, "NVIDIA's mafia-like behavior of investing in numerous players in the AI sector and making demands, in my view, has long constituted grounds for antitrust litigation."

He also warned that Jensen Huang's troubles could attract more attention. "A fallen figure attracts all kinds of speculators."

Burry also questioned the timing of chip purchases by NVIDIA customer Megaspeed, a company linked to Jensen Huang's alleged romantic interest. He stated, "If there is evidence, it will not be covered up. Likewise, lack of evidence will not stop media reports and various allegations. I do not believe this matter will pass quickly."

He said this crisis exposes the risk of NVIDIA's reliance on Jensen Huang: "Investors must realize that absolute power leads to absolute corruption, and when a key person walks so close to the edge, there is a risk of personal failure."