'Big Short' investor Michael Burry warns a 'troubling' number in Nvidia's earnings could be 'catastrophic' for its finances
Business Insider
February 26, 2026
AI-Generated Deep Dive Summary
Michael Burry, the famed short-seller highlighted in *The Big Short*, has raised concerns about Nvidia's financial health, warning of a "troubling" sign in its annual report. Specifically, Burry points to a nearly six-fold increase in the company's purchase obligations, rising from $16 billion to $95 billion over 12 months. This surge, driven by longer-term contracts with key supplier TSMC and cash payments for chip manufacturing capacity, has put Nvidia in a "risky position." Burry argues that if demand for its AI chips falters, this could lead to a "catastrophic" blow to Nvidia's finances.
Burry compares Nvidia's situation to Cisco during the dot-com bubble, when the tech giant extended supply commitments to meet booming demand but faced severe losses when growth collapsed. He notes that Nvidia's $117 billion in total supply obligations now nearly matches its annual operating cash flow, signaling a shift from "business as usual" to a high-risk model. This financial exposure could amplify any downturn, making Nvidia more vulnerable than typical tech companies.
The investor also highlights how Nvidia's hefty profit margins are partly driven by excessive demand for its AI chips, which gives it pricing power. However, if demand weakens, these margins could shrink significantly. Burry has previously bet against Nvidia, arguing the company is overly reliant on hyperscaler spending and lacks a diversified business model to weather potential downturns.
Despite these warnings, Nvidia's stock has surged over 13-fold since early 2023, making it the world's most valuable public company with a $4.6 trillion market cap. CEO Jensen Huang remains optimistic about AI's long-term growth, dismissing concerns about a bubble bursting as premature. However, Burry's analysis raises important questions about Nvidia's ability to sustain its rapid growth and manage its supply chain risks.
This matters because it underscores the potential dangers of overextending in booming markets and highlights how even high-growth tech companies can face severe financial consequences if demand doesn't meet expectations. For investors and businesses alike, Burry's insights serve as a cautionary tale about relying too heavily on any single market segment and the importance of maintaining financial flexibility in uncertain times.
Verticals
businessfinance
Originally published on Business Insider on 2/26/2026