Michael Burry is once again raising concerns about Nvidia’s business model, even as he expects the chipmaker to deliver a strong second-quarter earnings report. The investor, known for predicting the 2008 housing crisis, says Nvidia’s revenue and the broader artificial intelligence boom deserve closer scrutiny because of what he describes as circular financing across the AI industry.
Burry Expects Strong Nvidia Earnings
Nvidia is scheduled to report its second-quarter results after the market closes on Wednesday. Despite his bearish position on the company, Burry expects the numbers to be impressive. He said the results will be “lights out,” while warning that the earnings could be accompanied by intense investor enthusiasm and fear of missing out.
Wall Street is already expecting another massive quarter from Nvidia. Estimates cited by Yahoo Finance put revenue at roughly $92 billion, more than double the level from a year earlier. Adjusted earnings are also expected to rise sharply as demand for AI chips remains strong.
However, Burry believes strong reported results do not necessarily eliminate the risks surrounding Nvidia and the wider AI investment cycle.
Burry Questions Circular AI Spending
At the center of Burry’s argument is his claim that roughly 100% of announced revenue at chipmakers is circular, which he attributed to research from the Bank for International Settlements. His concern is that companies involved in the AI ecosystem may increasingly finance, invest in or guarantee business for one another.
Such arrangements can create a cycle in which money moves between chipmakers, cloud providers and AI companies, potentially making demand appear stronger and more independent than it actually is. Burry has repeatedly warned that this structure could become a major weakness if AI infrastructure spending slows.
The investor has also pointed to Nvidia’s dependence on major hyperscale customers such as Microsoft, Meta, Amazon and Alphabet. A significant reduction in spending from even one major customer could potentially affect Nvidia’s revenue growth, according to his analysis.
Wall Street Remains Bullish
Burry’s concerns contrast sharply with the broader Wall Street view. Analysts remain optimistic about Nvidia’s AI demand, upcoming products and ability to maintain its leadership in advanced computing chips. Current analyst targets cited in the report imply significant potential upside for the stock.
Nvidia has also recently announced partnerships with major financial firms to help mobilize more than $500 billion in third-party capital for AI infrastructure. The company says the initiative is designed to expand access to financing for AI data centers and computing infrastructure.
For investors, Nvidia’s upcoming earnings report could therefore become an important test of both sides of the debate. Strong results could reinforce the bullish case, while questions about customer concentration, financing structures and long-term AI spending may keep Burry’s warnings in focus.
Source : yahoo.com
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