Michael Burry sees Nvidia parallel to Cisco at dot-com bubble top
Michael Burry of “The Big Short” fame is doubling down on his bearish thesis on Nvidia , raising red flags on a line item in the chipmaker’s latest earnings report that echoes a pattern seen at the height of the dot-com bubble in the late 1990s. Burry, in a Thursday Substack newsletter, pointed to a surge in Nvidia purchase obligations, which climbed to $95.2 billion from $16.1 billion a year earlier. Total supply obligations, including inventory and purchase agreements, now stand at roughly $117 billion, nearly matching Nvidia’s annual operating cash flow. On the company’s fiscal fourth quarter earnings call Wednesday, Chief Financial Officer Colette Kress said inventory rose 8% quarter over quarter and that Nvidia had “strategically secured inventory and capacity to meet beyond the next several quarters, further out in time than usual.” For Burry, Nvidia’s comments suggest that the largest public company in the United States is committing to buy large amounts of supply before it knows exactly the strength of future demand. That means more cash is tied up in inventory for longer periods. ‘Not temporary’ “What is happening now is not temporary. It is no export shock. It is not even external. This is coming from within the business plan,” he wrote. “This new reality reflects a deliberate decision to lock up supply chain capacity further than Nvidia has ever done before.” The noted investor compares the current situation to that of Cisco Systems during the height of the dot-com boom in the late 1990s and the early 2000s. In 2000 and 2001, Cisco secured large supply commitments to support expectations of rapid growth. When corporate technology spending suddenly tumbled, Cisco was left with excess inventory and contractual obligations it couldn’t use. The company ultimately had to write down billions of dollars, and its stock plunged. “This is not business as usual. This is risk,” Burry said of Nvidia. “Back in 2000-2001, Cisco extended purchase commitments with its suppliers to ensure capacity for that 50% annual growth Cisco expected,” he said. To be sure, Nvidia’s profit margins, now above 70%, are higher than Cisco’s were at the time, which could provide some downside protection, the investor noted. But Burry believes those margins have been boosted by unusually strong demand and Nvidia’s ability to raise prices. “That type of margin would likely revert quickly with a shift in demand,” he wrote. Addressing concerns Still, not everyone sees the buildup as a warning sign. Analysts at Rosenblatt Securities said management addressed multiple investor concerns during the quarter, including GPU capacity, competition from custom chips, power availability, memory supply and customer financing. “We view this as a confident management team that will support customer demand for its next generation platforms and continue to lead the AI market development,” Rosenblatt analysts wrote in a note to clients. The Wall Street firm on Thursday lifted its 12-month price target on Nvidia to $300 from $245, which implies upside of more than 50% over the next year. Nvidia was near session lows, off almost 4% in early trading Thursday. The stock is higher by less than 1% so far in 2026, after soaring in 2023-2025 following the introduction of ChatGPT.
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