Michael Burry, who had bet against the US housing market ahead of the 2008 financial crisis, has a warning for Nvidia investors. He believes the chipmaker could struggle to maintain its business momentum following the departure of its long-time CEO Jensen Huang.
In a post on his Substack newsletter, Cassandra Unchained, Burry questioned whether Nvidia could function in the same way without Huang, given how closely the CEO was involved in its business strategy, sales and customer relationships.
In his November 11 post, titled 'The Don Goes Down: What Jensen's Fall Means,' Burry opened with the words, "The Don has fallen."
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He compared Nvidia's business model to a protection racket that has lost its enforcer, suggesting that Huang's departure could leave a gap that the next CEO may find difficult to fill.
"The coercion, it seems, came from the top. I do not see Colette or any new CEO replacing Don seamlessly," he wrote.
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Burry also pointed to reports that Huang had as many as 60 direct reports and delegated little, raising questions about how much of the company's operations rested with him. "The key-man risk at NVIDIA always was a worry," he added.
Why Michael Burry Is Worried About Nvidia
The concern for Burry is not limited to who takes over as CEO. He believes Huang's departure is likely to change the way Nvidia deals with its customers.
He has questioned whether customers would continue buying chips at the same pace without Huang leading those relationships. Some could delay purchases, renegotiate existing deals or look at competing suppliers, he suggested.
Burry has also raised concerns about the financing arrangements Nvidia has with customers and its investments across the AI ecosystem. He believes these arrangements have helped customers fund purchases of Nvidia chips, supporting demand across the industry.
If AI spending slows, these financing arrangements could come under pressure.
Another issue Burry has flagged is Nvidia's sales approach. He alleged that Huang pressured customers to buy chips even when they did not immediately need them, with the possibility of losing future supply allocations encouraging them to place orders early.
He believes customers could have more room to negotiate or look for alternatives without Huang at the helm.
AI Spending, Margins Also On Burry's Radar
Nvidia's growth has been driven by heavy investments in AI infrastructure and demand for its graphics processing units (GPUs). But Burry is questioning whether this pace of spending can continue.
If customers reassess their infrastructure requirements or slow down purchases, Nvidia could see its growth moderate. Its margins could also face pressure if customers gain greater bargaining power and the financing arrangements supporting demand begin to unwind.
Burry's broader argument is that Nvidia's business is about more than selling advanced chips. The customer relationships and commercial arrangements built around those sales have also played an important role in driving demand.
His message to investors was blunt: Huang's departure could give shareholders another opportunity to exit their positions.
Nvidia Shares Lose Over $1 Trillion In Market Value
Burry's warning comes as Nvidia shares have fallen sharply from their record high in early October.
The stock has declined more than 32% from its peak, with concerns over Huang's departure and the sustainability of AI infrastructure spending adding to the pressure, according to Reuters.
Nvidia has lost more than $1 trillion in market capitalisation in just over a week, according to MarketWatch. Its market value, which stood at nearly $5 trillion on November 3, was estimated at around $3.83 trillion in premarket trading on November 13.
The sell-off has also pulled down Nvidia's valuation. According to Reuters, the stock was trading at around 12 times expected earnings, its lowest forward price-to-earnings (P/E) multiple since 2012.
A lower valuation may make the stock look cheaper, but investors are also weighing whether Nvidia can sustain its earnings growth as AI spending evolves.
The company is scheduled to report its quarterly results on November 17. Investors will be watching its outlook and commentary on future demand.
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