Michael Burry: Is Nvidia's AI Boom a New Bubble?

Nvidia's impressive Q3 performance has once again underscored the robust growth trajectory of the artificial intelligence sector. Yet, amidst the market's enthusiasm, a familiar voice of dissent has emerged. Michael Burry, the renowned investor famously chronicled in "The Big Short," has stepped forward to cast a critical eye on the sustainability of this AI boom, particularly focusing on Nvidia's valuation and the underlying market dynamics. His skepticism, rooted in a deep understanding of market cycles and potential overvaluations, presents a compelling counter-narrative to the prevailing bullish sentiment surrounding AI stock and investment.

Nvidia's Stellar Performance Amidst AI Enthusiasm

Nvidia's recent quarterly report delivered figures that exceeded even the most optimistic projections, reaffirming its pivotal role in the AI revolution. The company reported a substantial surge in revenue, reaching $57 billion in Q3, marking a 62% year-over-year increase and a 22% quarter-over-quarter growth, significantly surpassing analysts' estimates. Profits followed suit, with EPS hitting $1.30, underpinned by robust gross margins exceeding 73%. The data center segment was the primary driver, contributing approximately 90% of Nvidia's total revenue, fueled by extraordinary demand for its Blackwell systems. Furthermore, Nvidia's ambitious Q4 revenue guidance of $65 billion, well above consensus forecasts, signals an unabated acceleration in the AI infrastructure build-out, suggesting the AI market is far from reaching its peak.

Michael Burry's Skepticism: Unpacking the "Big Short" Arguments

Despite these dazzling earnings, Michael Burry, through his public commentary on platforms like X, has articulately challenged the narrative of unbridled AI growth. His core argument revolves around several intricate financial and economic considerations that he believes are being overlooked by many investors. Firstly, Burry critiques the practice of extended GPU depreciation schedules, arguing that these accounting adjustments may distort the true earnings picture by conflating mere utilization with genuine value creation. This, he posits, could lead to an artificial inflation of reported profits, masking underlying vulnerabilities in the AI stock market.

Secondly, Burry raises pertinent questions about the authenticity and sustainability of AI demand. He points to a peculiar dynamic where "customers are funded by their dealers," suggesting a circular financing model among hyperscalers that could artificially prop up spending. This scenario, according to Burry, blurs the lines of true end-customer demand, making it difficult to ascertain the organic health of the AI investment landscape. Additionally, he highlights the increasing electricity costs associated with older chips, an operational challenge that could weigh on the profitability and efficiency of AI infrastructure in the long run. Collectively, Burry's insights paint a picture of an AI market potentially inflated by speculative fervor and obscured by complex financial arrangements, reminiscent of past market excesses.

The Enduring Legacy of "The Big Short"

Michael Burry's warnings carry significant weight due to his unparalleled track record in identifying and profiting from major market inefficiencies. His legendary bet against the U.S. subprime mortgage market in the mid-2000s, meticulously detailed in "The Big Short," not only earned him nearly $100 million personally but also generated an additional $700-$725 million for his investors. This prescient call cemented his reputation as a contrarian visionary who is willing to endure brutal drawdowns in pursuit of deeply held convictions, ultimately emerging victorious. After successfully navigating the 2008 financial crisis, Burry continued his independent investment journey, eventually launching Scion Asset Management. Although the firm later deregistered in November 2025, signaling a shift in his focus, his influence on the investment community remains profound. His ability to dissect complex financial data and foresee systemic risks places his current critique of the AI stock sector firmly in the spotlight for any astute investor looking for alternative perspectives.

Burry's Current Stance on the AI Market: Echoes of Past Bubbles?

Burry's recent pronouncements extend beyond mere rhetorical skepticism; they are backed by tangible investment positions. Reports from Morningstar in November 2025 revealed that Scion Asset Management had placed significant put options on 1 million Nvidia shares and 5 million Palantir shares. This represented a combined bearish exposure exceeding $1.1 billion, constituting approximately 80% of the firm's Q3 portfolio, a clear indication of his conviction regarding a potential AI bubble. Furthermore, Burry has drawn historical parallels, likening the current levels of AI capital spending to the excessive capital expenditure-to-GDP ratios observed immediately preceding significant market busts in the dot-com era. Such comparisons serve as a stark warning, suggesting that the current enthusiasm for AI stock and investment might be mirroring the unsustainable exuberance of previous technological revolutions, setting the stage for a potential correction. This perspective challenges the widely held belief that the current AI market growth is fundamentally different and immune to historical patterns of speculation.

Conclusion: Navigating the AI Investment Debate

The ongoing debate between Nvidia's impressive financial performance and Michael Burry's cautionary investment insights highlights the inherent complexities and risks within the rapidly expanding AI market. While Nvidia's CEO Jensen Huang remains steadfast in his belief that the AI boom is still in its early stages, Burry's historical perspective and analytical rigor offer a crucial counterbalance. His arguments compel investors to look beyond headline earnings and scrutinize the underlying accounting practices, demand dynamics, and macroeconomic indicators that could signal an impending market correction. Whether the AI stock market is indeed heading towards a "Big Short" moment or if it represents a genuinely transformative and sustainable growth phase remains to be seen. However, Burry's voice serves as a vital reminder for all market participants to approach the AI investment landscape with both optimism and a healthy dose of critical evaluation, ensuring that decisions are grounded in comprehensive analysis rather than mere speculative fervor. The future trajectory of AI stock and the broader technological sector will undoubtedly be shaped by how these contrasting viewpoints ultimately play out.