Nvidia, the world’s most valuable company, has addressed a memo to sell-side stock analysts pushing back on some of the criticisms against it, particularly those issued by investor Michael Burry. Burry, who was featured in the book and movie “The Big Short,” had made a series of social media posts arguing that the artificial intelligence investment boom is replaying the dotcom bubble from the 1990s.
The Nvidia seven-page response to “questions and claims we’ve received,” began by citing “Michael Burry on Twitter / X” as its first collection of source documents the company sought to refute.
The memo, seen by Reuters, was published in full by research firm Bernstein on Wednesday. In it, Nvidia responded to a Substack essay by a different author that purported to use an AI analysis of Nvidia’s public financial disclosures to show that inventories were piling up and customers were unable to pay.
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Nvidia provided a detailed rebuttal, pointing to its publicly available disclosures, to say why it should not be compared to historical accounting frauds such as WorldCom, Lucent or Enron. However, the company did concede that its most recent Blackwell chips had lower gross margins and higher warranty costs than previous models due to the Blackwell’s complexity.
The company responded to Burry’s criticism of Nvidia’s stock-based compensation dilution and stock buybacks, saying, “NVIDIA repurchased $91B shares since 2018, not $112.5B; Mr. Burry appears to have incorrectly included RSU taxes,” the memo said, referring to Restricted Stock Units. “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 benefitting from a rising share price does not indicate the original equity grants were excessive at the time of issuance.”
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The memo also pushed back on Burry’s charge that customers are overstating the useful lives of Nvidia’s graphics processing units in order to justify runaway capital expenditures. Nvidia responded to this by saying its customers depreciate GPUs over four to six years based on real-world longevity and utilization patterns.
Nvidia added that older GPUs such as A100s, released in 2020, continue to run at high utilization rates and retain meaningful economic value well beyond the two to three years claimed by critics. The memo also criticized Burry’s suggestion of “circular financing,” saying Nvidia’s strategic investments represent a small fraction of revenue and that AI startups raise capital predominantly from outside investors.
Burry responded to this via a post on Substack, saying ““Nvidia emailed a memo to Wall Street sell side analysts to push back on my arguments on [stock-based compensation] and Depreciation … I stand by my analysis. I am not claiming Nvidia is Enron. It is clearly Cisco.”