Michael Burry Says Nvidia’s Biggest Problem Isn’t Jensen Huang
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The leadership scandal is the smaller problem. So says Michael Burry, the Scion Asset Management founder made famous by The Big Short, about the situation at NVIDIA (NASDAQ:NVDA | NVDA Price Prediction). The bigger one is how the AI boom is being paid for. His view matters more now. On November 12, 2026, Jensen Huang resigned as CEO, President, and member of the Board of Directors, effective immediately. CFO Colette Kress was named interim CEO while retaining her CFO role.
Nvidia traded at $166.92 late this morning. That is down 3.92% on the day, 16.59% over the past week and 26.25% over the past month.
Burry Says the Scandal Hides a Bigger Risk
In a Substack post reported by Business Insider, Burry said he was “a bit shocked at how the market has turned on the company”. He raised questions about the “scandal will hurt the economics of the business tremendously.” He is still bearish. He warned that Nvidia’s competitive advantage could shrink faster over the next five years than he had expected. He described the company’s investments in other AI players, and its demands on them, as “mafia-like behavior”.
His core argument is about the money behind the AI build-out. He estimates Big Tech has more than $3 trillion in future AI spending commitments. He also argues that aging chips could lose value faster than customers can earn back what they paid, as hyperscalers spread the cost of GPUs over many years through depreciation, the accounting charge for wear and obsolescence. Today’s reported profits are too high. If that schedule is longer than the chips’ real working life, future purchases could slow when the true costs show up.
Nvidia’s Balance Sheet Shows Growing Exposure to Its Customers
The latest results were strong. In Nvidia’s Q2 fiscal 2027 release, revenue was $96.221B, up 105.85% from a year earlier. Data Center revenue was $89.023B. Non-GAAP EPS of $2.22 beat the $2.0887 consensus. The same filing also shows how much risk Nvidia is taking on for its customers:
- Supply obligations: $279.00B, mostly memory for Vera Rubin.
- Guarantees: obligations to AI cloud and data center partners capped at $108.5B.
- Lab investments: nearly $50 billion invested in frontier AI labs.
- Receivables: days sales outstanding, the average time it takes to collect payment, rose to 60 days from 45 days.
Some of the financing deals include a “take-or-pay commitment on a portion of the facility’s capacity, a minimum revenue guarantee”. Kress address to the criticism directly on the call: “We know some will call this circular financing. We see it differently.” Nvidia also invested $2 billion in CoreWeave (NASDAQ:CRWV), one of the AI cloud companies that buys its chips.
Management’s Answer on Chip Lifespan
Management’s response to the obsolescence concern is that its hardware is “fungible and durable and can be redeployed to support other customers.” Huang cited a payback period of less than a year for some data centers. He noted that demand is far higher than the roughly 70% fiscal 2028 growth that supply can currently support. Nvidia expects capital spending by the top five hyperscalers of nearly $800 billion in 2026 and $1.3 trillion in 2027.
That outlook depends on customers continuing to spend. AI labs are expected to make up roughly a quarter of Nvidia’s business next year. Kress also said these labs are growing faster than their balance sheets and credit profiles can support. At a P/E of about 35, investors are paying for that spending to continue.
What to Watch at Tuesday’s Earnings
Nvidia will still report earnings on Tuesday as scheduled. The guidance on record calls for revenue of $108.0B ±2% and gross margin of 74.0%. Three things to watch are whether the guarantees and supply obligations keep growing, whether receivables are collected faster or slower, and whether gross margin reaches its expected Q4 low of 71% to 72% on schedule. Burry also flagged the risk of a US government crackdown on Nvidia’s chip sales to China. Even so, he said he could “imagine the whole market is going to think this is a heck of a trade fairly soon.”
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After two decades of patrolling the dark corners of suburbia as a police officer, Rich Duprey hung up his badge and gun to begin writing full time about stocks and investing. For the past 20 years, he’s been cruising the markets looking for companies to lock up as long-term holdings in a portfolio while writing extensively on the broad sectors of consumer goods, technology, and industrials. Because his experience isn’t from the typical financial analyst track, Rich is able to break down complex topics into understandable and useful action points for the average investor. His writings have appeared on The Motley Fool, InvestorPlace, Yahoo! Finance, Money Morning, and, of course, 24/7 Wall St. He has been featured in both U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, and USA Today.
