Nvidia is pushing back after investor Michael Burry of “The Big Short” fame took aim at the company.
A note Nvidia sent to a Wall Street analyst, a copy of which was obtained by Business Insider, addresses a spate of recent criticisms and claims made about the company and names Burry directly. It specifically cited an X post Burry made last week that said Nvidia’s stock-based compensation had hurt shareholder value, “reducing owner’s earnings by 50%.”
The memo offered this direct response to Burry’s claims:
“Nvidia repurchased $91B shares since 2018, not $112.5B; Mr. Burry appears to have incorrectly included RSU taxes. Employee equity grants should not be conflated with the performance of the repurchase program. Nvidia’s employee compensation is consistent with that of peers. Employees benefiting from a rising share price does not indicate the original equity grants were excessive at the time of issuance.”
Burry has recently gained attention online for going after the AI giant and expressing skepticism about the sustainability of the AI boom. He recently closed his hedge fund, Scion Asset Management, to outside cash, and launched a newsletter.
He continued his criticism of Nvidia in the first blog posted to his new Substack, “Cassandra Unchained,” which launched on Sunday.
In an X post on Monday, Burry acknowledged Nvidia pushing back on his arguments in the memo to analysts, adding, “I stand by my analysis. Obviously, the full analysis does not fit in a tweet. I will release on my timeline.”
The Nvidia memo, which was previously reported by Barron’s, also addressed several other claims recently made about the AI boom, including comparisons to “historical accounting frauds” such as Enron, WorldCom, and Lucent.
“Nvidia does not resemble historical accounting frauds because Nvidia’s underlying business is economically sound, our reporting is complete and transparent, and we care about our reputation for integrity,” the memo said.
Nvidia, in the memo, also responded to criticisms about circular financing between the AI companies.
“First, Nvidia’s strategic investments represent a small share of Nvidia’s revenue and an even smaller share of approximately $1T raised each year across global private capital markets,” the memo said, adding, “The companies in Nvidia’s strategic investment portfolio predominantly generate revenue from third-party customers, not from Nvidia.”
Nvidia declined to comment.
The stock market’s AI trade has stumbled in recent weeks, with declines in the most popular momentum names being driven by investors’ concerns about valuations, circular dealmaking, and worries about depreciation of high-end GPUs like the ones Nvidia makes to train AI models.
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