A Tectonic Shift in the AI Bubble? Burry vs. Nvidia, the Critical Moment for the 'Second Cisco'

In November 2025, the financial world is once again focused on the clash between Michael Burry, the renowned investor who predicted the 2008 housing bubble collapse, and Nvidia, currently considered the 'symbol' of the AI boom. Burry has strongly criticized Nvidia and warned that the entire AI sector is in the danger zone of a 'bubble.' Meanwhile, Nvidia has issued a memo rebutting Burry's claims, asserting the legitimacy of its accounting and valuation. Whether this ends as a mere dispute or leads to a revaluation of the entire market—the outcome of this confrontation could influence the future of tech investment and AI expectations.

Below, we summarize the content and background of both parties' arguments, as well as the potential impact if Burry's assessment gains traction.

1. Burry's Criticism — Why an 'AI Bubble'?

1-1. An Overvalued AI Ecosystem

Burry argues that the growth and earnings prospects of AI-related companies, including Nvidia, are supported by 'overly optimistic valuations' that are not sustainable. According to him, many AI companies are estimating excessively long depreciation periods for equipment to justify capital expenditures on hardware (GPUs and servers), effectively stretching the book value of equipment that should have a much shorter lifespan. As a result, while they may appear profitable in the short term, future value declines and impairment risks may be being deferred.

He also warns that 'final demand (actual end-user demand)' for AI is not as large as current investments and orders suggest, and that a structure similar to circular financing—supported by 'dealers (intermediaries moving funds behind the scenes)'—is spreading. In other words, his view is that much of the current demand is not demand from the real economy.

1-2. A Concrete 'Contrarian' Position Against Nvidia

Beyond mere verbal warnings, Burry is taking actual action. As of November 2025, he has built a large bearish position in the form of put (sell) options against Nvidia and Palantir, with a notional principal of approximately $1.1 billion. This is a bet on the decline of these companies' stock prices, signaling that he is putting his capital, not just his words, behind the declaration that the 'AI bubble will burst.'

Such actions are reminiscent of the methods used by investors who showed signs of the impending subprime crisis in 2008. Burry has dissolved his asset management firm, Scion Asset Management, and has now shifted to a limited fund management model that includes personal capital. Furthermore, he has launched a new paid newsletter (Cassandra Unchained), gaining a platform to widely disseminate his analysis and warnings. As a result, he now has influence not only over institutional investors, as he did in the past, but also over a broad range of individual investors.

2. Nvidia's Rebuttal and Current Assessment

2-1. The Argument That Accounting and Shareholder Returns are 'Normal/Appropriate'

Nvidia sent a 7-page report (memo) to Wall Street analysts at the end of November to rebut Burry's claims. The memo states that his arguments are incorrect, asserting that his analysis, which overly scrutinizes stock-based compensation (RSU) and share buybacks, is flawed. For example, Nvidia counters that the total buyback figure of '$11.25 billion' mentioned by Burry incorrectly includes tax deductions, and that the actual buyback amount is approximately $91 billion. Furthermore, Nvidia claims that its employee compensation levels are 'reasonable/normal' compared to other industry peers, and that there is no excessive stock-based compensation that unfairly reduces shareholder returns.

Nvidia also emphasizes that it is not engaging in accounting fraud like companies that collapsed due to past accounting scandals (such as Enron). It does not acknowledge any similarity to Enron's structure of infrastructure excess or hidden excessive debt, stating that AI demand is not a 'temporary boom' but a 'long-term growth cycle' that will continue.

2-2. Nevertheless, the Stock Price is Shaken — Investor Opinions are Divided

Interestingly, despite reporting strong earnings, Nvidia's stock price has fallen. In November 2025, there were reports that the company's stock price dropped by approximately 11-14% against the backdrop of caution regarding the AI boom.

This suggests that the market is deepening its doubts not just based on earnings or performance, but from the perspectives of 'sustainability of future growth,' 'the outlook for AI investment fever,' and 'correction of overvaluation.' In other words, the question of whether Nvidia is 'overpriced right now' is beginning to be re-examined in the context of future demand and risk outlooks, rather than just financial fundamentals.

3. Why This Dispute is Important — Implications for the Future of Investment and AI

3-1. Bubble or Long-term Growth — Investor Sentiment and Market Turning Points

The composition of Burry vs. Nvidia is not merely a 'bull vs. bear' debate. This is a battle at a turning point that shakes the beliefs and psychology of investors regarding whether 'AI is a structural revolution' or 'a bubble of excessive expectations.'

In the past, during the dot-com bubble of the late 1990s, there were cases where major hardware/infrastructure companies (e.g., Cisco Systems) saw their stock prices crash after the bubble burst due to excessive capital investment and high valuations based on forward-looking expectations. Burry positions Nvidia as the 'next Cisco,' suggesting the possibility that AI hardware could end up as a 'pie in the sky'.

If many investors resonate with his assessment, that alone could trigger a 'selling stampede.' As Burry himself points out, 'Every detail does not need to be accurate. If you can spread enough anxiety, you can make the bubble burst a reality.'

3-2. An Era Where Transparency in Accounting and Revenue Recognition Is Questioned

Now that complex business models involving AI, cloud, and hardware are becoming mainstream, the impact of the treatment of leases, depreciation, and capital expenditures—among other factors—on accounting rules and the background of revenue recognition is increasingly significant for corporate value.

What Burry is questioning is not just stock prices or a sense of overheating, but the possibility that such accounting practices—specifically the way of 'under-depreciating equipment or extending asset life over long periods'—are making earnings appear better than they actually are. Nvidia's rebuttal is strictly a claim of legality and transparency, but ultimately, 'the value truly generated (cash flow and demand)' will be called into question. This is an issue that extends beyond AI companies to the broader tech industry.

4. Key Points to Watch Moving Forward

• The Reality and Sustainability of AI Demand: Is the investment in AI infrastructure driven by 'true business demand,' or is it an 'excess capacity/investment cycle'? Specifically, the growth pace of data center demand, cloud demand, and AI model demand.

• Accounting Practices and the Treatment of Depreciation: To what extent will investors and analysts factor in equipment depreciation schedules, asset lifespans, and future impairment risks?

• Market Sentiment and Capital Flows: The growing influence of bearish critics like Burry, the movements of participants in subscription-based information services, the actions of institutional investors, and the outflow/inflow of funds into AI-related stocks.

• Structural Changes in the AI Industry as a Whole: Will there be a shift from chip-centric hardware demand to software and service-centric demand, or a transition to other technological trends (e.g., quantum computing, on-device AI, etc.)?

Conclusion

The ongoing conflict between Burry and Nvidia is not merely a dispute between an individual investor and a corporation; it is a critical turning point that challenges the valuation, accounting practices, and market psychology of the AI era. By issuing another 'bubble warning' and actually taking a position, Burry has turned this discussion from a mere hypothesis into a reality—a 'precursor accompanied by actual capital movement.'

What shapes the future may not be who is right. Rather, it is 'how many investors accept the doubt and change their market behavior.'
If skepticism like Burry's spreads, it could put a brake on the overheating of AI stocks. And that could lead to a tectonic shift across the broad tech industry—from AI-related startups to giant platformers and hardware companies.

In that sense, this conflict is 'one of the most unmissable turning points in the AI and tech market right now.'

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