Why Michael Burry Prefers Shorting Nvidia Over Meta, Alphabet, or Microsoft

Michael Burry, famed for his prediction of the housing market collapse, is pessimistic about Nvidia's prospects, unlike those of other tech giants. He identifies Nvidia as uniquely susceptible should the current AI trend come crashing down.

According to his statements on Substack, Burry emphasizes that Nvidia is excessively reliant on expenditure by large-scale computing service providers. He believes this reliance creates an unsustainable financial equation.

Burry, who transitioned from operating a hedge fund to sharing insights online, notes Nvidia's anticipated $400 billion chip sales this year juxtaposed with under $100 billion in actual application usages.

He finds Nvidia particularly vulnerable because it's a market darling that's rarely questioned, making it an attractive target for shorting.

Additionally, Burry mentions CoreWeave, a cloud service entity aligned with Nvidia, as it acts almost like a subsidiary or favored partner to the company.

The meteoric rise in Nvidia's stock, increasing twelvefold since early 2023, has crowned it the most valuable public company globally at a valuation of $4.5 trillion.

While criticising potential short positions on Meta, Alphabet, or Microsoft, Burry points out that such bets would involve betting against their core competencies beyond AI, such as social media, search engine capabilities, and productivity software.

These tech behemoths, according to Burry, continue to exert significant influence in areas outside AI, suggesting their resilience even amidst technological turbulent transitions.

Burry remarks that even if these companies write down assets or revise earnings as AI excitement wanes, their strong global presence outside AI remains a defensive shield.

In contrast, Burry would consider shorting OpenAI were it publicly traded, citing its remarkable $500 billion valuation that surpasses stalwarts like Johnson & Johnson.

His other target, Oracle, has not escaped his skepticism, expressed through bearish options and direct shorting. Burry criticizes its direction under Larry Ellison's guidance.

Technological Evolution and Risks

Drawing parallels between the past and present, Burry compares the current AI hype to the transformative yet turbulent era of electrification.

In his discourse, he reflects on the massive investments required during the electrification boom, acknowledging how quickly innovation led to obsolescence and financial strife.

Burry cautions that AI could be potentially perilous, serving more as a stimulant for hyper-efficient capabilities than a steady, evolutionary technology.

He particularly warns against the hazards of investing heavily in energy-consuming AI hardware, especially with countries like China expanding energy infrastructure more rapidly.

In summary, Burry envisages significant challenges in the AI sector, paralleling them with historical episodes of technological advancement, and associates this with potential inventory complications as energy demand and supply may get mismatched.