Michael Burry Warns Nvidia’s $95 Billion Supply Obligations Could Mirror Cisco Bubble
Michael Burry flagged Nvidia’s purchase obligations soaring to $95.2 billion from $16.1 billion year-over-year, pushing total supply commitments to roughly $117 billion. He warned this risk exposure mirrors Cisco’s 2000 overcommitment and could pressure Nvidia’s 70% profit margins if AI demand cools.
1. Surge in Purchase Obligations
Nvidia’s latest Form 10-K shows purchase obligations soaring to $95.2 billion from $16.1 billion a year earlier, bringing total supply commitments to about $117 billion as the company locks in long-term capacity with key foundries.
2. Cisco Parallel and Risk Assessment
Michael Burry warns this level of structural overcommitment echoes Cisco’s dot-com bubble strategy, which led to an 80% stock collapse when inventory became stranded, and cautions that Nvidia’s 70% profit margins may erode sharply if AI demand softens.
3. Analyst Responses and Market Impact
Analysts at Rosenblatt Securities lifted Nvidia’s price target to $300, interpreting the aggressive capacity booking as a sign of management confidence in next-generation AI platforms, while shares have slipped 0.86% year-to-date despite a 40.8% annual gain.