Nvidia Addresses Michael Burry’s Criticism of AI Strategies
Nvidia is responding to criticism from investor Michael Burry, best known for his role in “The Big Short.” Recently, Burry publicly challenged Nvidia’s compensation practices, claiming they have significantly harmed shareholder value.
Nvidia’s Defense Against Criticism
In an internal memo addressed to Wall Street analysts, Nvidia refuted Burry’s allegations. The company specifically countered Burry’s assertion that its stock-based compensation reduced owners’ earnings by 50%. Nvidia clarified that it had repurchased $91 billion worth of shares since 2018, rather than the $112.5 billion cited by Burry.
Key Points from Nvidia’s Response
- Nvidia emphasized the miscalculation regarding restricted stock unit (RSU) taxes included by Burry.
- The company stated that its employee equity grants should not be equated with the effectiveness of the stock repurchase program.
- Nvidia noted that its employee compensation aligns with industry peers.
Burry has gained notoriety for his skepticism about the AI industry’s longevity. He recently closed his hedge fund, Scion Asset Management, to new investors and began a newsletter titled “Cassandra Unchained.” In his inaugural blog post, he reiterated his doubts about Nvidia.
Burry’s Continued Critique and Reactions
Despite Nvidia’s memo, Burry stands by his analysis of the company’s practices. He has indicated on social media that his complete views will be shared in future posts.
Addressing Broader Concerns About AI
Nvidia’s memo not only focused on Burry’s claims but also addressed larger criticisms surrounding the AI boom. Some commentators have compared the company’s practices to historical accounting scandals, including Enron and WorldCom.
- Nvidia stated that it operates with economic soundness and commits to integrity in its reporting.
- Concerns regarding financial circularity in the AI sector were also tackled by Nvidia, with the company stating that its strategic investments make up a minor portion of its revenue.
The AI market has faced challenges recently, with multiple leading companies experiencing a downturn. Investors are increasingly worried about valuation metrics, inter-company financing, and potential depreciation of high-end graphics processing units (GPUs) essential for AI model training.
Conclusion
Nvidia’s robust response to Burry’s allegations highlights its commitment to transparency and sound business practices. As discussions surrounding the AI industry continue, Nvidia aims to clarify its position amidst growing skepticism.
