Nvidia’s $500 Billion Momentum Challenges Billionaire Michael Burry’s Bearish Stance

Despite a recent downturn in the tech-heavy Nasdaq Composite index, Nvidia remains a powerhouse in the AI chip market. Billionaire investor Michael Burry has taken a bearish position against Nvidia through significant put options, but analysts suggest his stance may be misguided.

Nvidia’s Strong Performance Amid Market Fluctuations

Last week, the Nasdaq fell by 3%—its steepest weekly decline since April—affecting numerous tech stocks. Amidst this sell-off, Burry’s Scion Asset Management disclosed substantial bearish positions on Nvidia and Palantir Technologies, with their respective stocks dropping 7.1% and 11.2% during the same period.

Burry’s Financial Moves

• Burry acquired 1 million Nvidia put options, valued at approximately $186.6 million.
• These options were purchased between July 1 and September 30.

The details regarding the specifics, including costs, strike prices, and expiration dates of these options, remain undisclosed. Burry’s reputation as a shrewd investor stems from his prediction of the 2008 financial crisis, notably depicted in the film “The Big Short.”

Nvidia’s Market Potential

Nvidia’s CEO, Jensen Huang, recently announced that the company anticipates visibility into $500 billion of demand for its AI technologies through 2026. This forecast stems from their AI-enabled GPU architecture, Blackwell, and future developments, like their Rubin chips.

Demand Forecast and Financial Outlook

This $500 billion demand equates to a potential revenue of approximately $100 billion per quarter, significantly exceeding their most recent quarterly data center revenue of $41.1 billion, which accounted for 88% of total revenue.

• Current Market Capitalization: $4,837 billion
• Forward P/E Ratio: 29.9
• Average Expected Earnings Growth: 40% annually over the next five years

The market sentiment suggests that major tech companies, key buyers of Nvidia’s products, will prioritize AI investments even in the face of economic slowdown, further solidifying Nvidia’s market position.

Assessment of Burry’s Position

In summary, betting against a company like Nvidia, which is experiencing remarkable growth and is riding the wave of AI demand, carries substantial risk. Burry’s bearish bet could likely result in significant losses, given Nvidia’s evolving market dynamics and performance outlook.