Michael Burry Slams Tesla's Overvaluation, Claims Nvidia's Finances Appear Better Than They Are

Big Short's Michael Burry has once again voiced his scepticism over Tesla, describing the electric vehicle giant as a 'ridiculously overvalued' company in a Sunday Substack post.

'Tesla's market capitalisation is ridiculously overvalued today and has been for a good long time,' Burry stated.

The investor, renowned for his contrarian bets—including profiting hundreds of millions during the 2008 financial crisis by betting against the US housing market—continues to challenge mainstream optimism around tech giants.

His critique focused on what he calls the 'tragic algebra' of stock-based compensation, citing Tesla as a prime example. Burry pointed out that Tesla dilutes its stock by approximately 3.6% annually, yet the company has not implemented share buybacks to offset this dilution.

He also highlighted Tesla's frequent strategic pivots, noting how the automaker has shifted focus across various tech sectors. 'As an aside, the Elon cult was all-in on electric cars until competition showed up, then all-in on autonomous driving until competition showed up, and now is all-in on robots — until competition shows up,' Burry remarked.

Concerns Over Tesla's Shareholder Dilution

Regarding Elon Musk's recent $1 trillion (£756.8 billion) pay package—approved by Tesla shareholders in November—Burry warned that it would further dilute existing shares.

Burry placed a $530 million (£401.1 million) bet against Tesla in 2021 but closed the position months later. Musk is known for criticizing Tesla short sellers, most recently urging Bill Gates to close his short position soon or risk losing $1.5 billion (£1.1 billion).

While Burry warns investors about Tesla's valuation, Wall Street analysts remain bullish. Recently, Melius Research called Tesla a 'must own' due to its autonomy efforts. Stifel also reiterated its 'Buy' rating and raised its 12-month price target, citing the robotaxi venture and progress in full self-driving.

Burry Questions Nvidia's AI Accounting Practices

Burry's scepticism extends beyond Tesla. He recently questioned how companies like Nvidia are accounting for the high costs of AI chips. He theorised that longer depreciation schedules might be making these companies' finances appear healthier than they actually are.

He suggested that part of the AI demand could be driven more by investor speculation than actual customer uptake. Nvidia's shares have soared over 1,000% in the past three years, but Burry believes the hype has outpaced reality.

In Q3, Burry wagered $1 billion (£756.8 million) against Nvidia and Palantir, citing concerns over inflated valuations. Shortly after, he shut down his hedge fund, Scion Asset Management, stating that market fundamentals no longer aligned with his investment approach.

Rising Skepticism and Market Concerns

The AI bubble debate intensified when Palantir CEO Alex Karp dismissed Burry's concerns as 'crazy'. Meanwhile, short seller Jim Chanos echoed similar worries, accusing Nvidia of using vendor financing to artificially boost sales. Both Chanos and Burry have previously held short positions in Tesla.

Burry's recent posts on X reflect his growing concern. 'Sometimes, we see bubbles. Sometimes, there is something to do about it. Sometimes, the only winning move is not to play,' he wrote.

He appears to reference the 1983 film WarGames, where an AI concludes that 'the only winning move is not to play,' underscoring his caution about AI market exuberance.

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