'Nvidia is Wildly Undervalued': Michael Burry Goes Long Despite Shuttering His Hedge Fund Over AI Bubble Fears

Big Short's Michael Burry said Nvidia is 'wildly undervalued', but still opened a long position in the company, which he has long believed is leading the formation of an AI bubble.

'Low price-to-earnings ratio for a big grower that currently commands monopoly rents,' Burry noted on Nvidia in a Wednesday Substack post, hours before the AI leader posted blockbuster fiscal Q2 results.

Burry purchased Nvidia call options with strike prices in the mid-to-high $200s, but described the trade as a 'hedge', adding that the premium on the calls is considerable, but 'entirely offset' by his existing short position on the stock. 'I am not playing for gains here,' he added.

Burry Warns of AI Bubble and Tricks Amid Nvidia's Rise

Meanwhile, Nvidia believes it could rake in over $100 billion in the next quarter as demand for AI infrastructure outpaces supply.

Burry, who predicted the 2008 global crisis, shuttered his Scion Asset Management hedge fund last year, citing that market fundamentals do not align with his investment philosophy.

He has consistently warned about an AI bubble and how leading US megacap technology firms use accounting tricks to make their balance sheets appear better than they actually are and undervalue GPU depreciation.

The investor had earlier mentioned that 'understating depreciation by extending the useful life of assets artificially boosts earnings,' and it is 'one of the more common frauds of the modern era.'

He has also repeatedly warned about growing leverage risks tied to off-balance-sheet commitments across the tech sector, as well as companies becoming overextended with long-term lease obligations that outweigh the current sales trajectory.

Burry had even targeted tech firms and hyperscalers purchasing Nvidia chips, arguing they should not be extending the useful lives of computing equipment that typically has a two- to three-year product cycle. He had forecast that these hyperscalers would understate depreciation by $176 billion between 2026 and 2028, adding that Oracle will overstate earnings by 26.9% and Meta by 20.8% by 2028.

Burry Predicts Shocking Reductions for Nvidia Earnings

The famed investor believes that as it could focus more on capital expenditures to fuel the AI infrastructure buildout. Although the company returned $26 billion to shareholders through buybacks and cash dividends in Q2, it said it would now ramp up its capital commitments and even help partner companies drive growth.

Burry said Nvidia's investment 'into and through the top of the bubble' may result in 'shocking reductions in earnings' not terribly far into the future.

He had even warned in an earlier Substack post that leading companies like Nvidia and Elon Musk's xAI are leveraging GPU-backed securities deal structures to secure funding to power their growing AI data centres while putting the retirement funds of Americans at risk.

He had detailed in his post the exact pipeline that moves retiree savings into running Musk's AI data centres without them knowing about it, describing such deals as 'fugazi', his word for fake.

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