US-based chipmaking giant, Nvidia Corp., in a seven-page memo response, refuted \u2018big short\u2019 investor Michael Burry’s claims, who has been arguing that the artificial intelligence (AI) investment boom is replaying the dotcom bubble from the 1990s, reported the news portal CNBC.<\/p>\n
Investor Michael Burry<\/a>, the founder of now-dissolved Scion Asset Management and one of the early people to bet against the US housing market in 2008, used a financial instrument like credit default swaps (CDS).<\/p>\n Also Read<\/strong> | Mega-cap stocks lead earnings growth for S&P 500 in September quarter<\/a><\/p>\n Burry’s bet paid off big after the housing market crashed due to the subprime mortgage crisis, making him $100 million back in 2008. After terminating the registration status of his hedge fund, Burry has now turned his attention to a potential AI bubble in the US market<\/a>.<\/p>\n Nvidia’s pushback on Michael Burry<\/p>\n Nvidia allegedly sent its seven-page responses to the sell-side analysts on Wall Street in an effort to push back on Michael Burry’s claims on the company’s stock-based compensation and the depreciation of its GPU chips, reported the news portal, citing Burry’s Substack post.<\/p>\n Nvidia said that the US-based chipmaker repurchased $91 billion shares in 2018, and not $112.5 billion, which Burry claimed, citing that the \u2018big short\u2019 investor incorrectly included Restricted Stock Units (RSUs) in the calculation.<\/p>\n Also Read<\/strong> | Are AI stocks in a bubble? What market experts say<\/a><\/p>\n \u201cNvidia<\/a> repurchased $91B shares since 2018, not $112.5B; Mr. Burry appears to have incorrectly included RSU taxes,\u201d the company said, cited the news portal.<\/p>\n The company also said that the equity grants to the employees are not to be combined with the performance of the repurchase program.<\/p>\n \u201cEmployee equity grants should not be conflated with the performance of the repurchase program. NVIDIA\u2019s employee compensation is consistent with that of peers. Employees benefiting from a rising share price does not indicate the original equity grants were excessive at the time of issuance,\u201d said Nvidia, cited in the news portal’s report.<\/p>\n Nvidia’s take on depreciation of GPU chips<\/p>\n According to the CNBC report, Nvidia countered Michael Burry<\/a>‘s claims, saying that the customers depreciate the GPUs over four to six years based on the real-world longevity and utilisation patterns of these chips.<\/p>\n Also Read<\/strong> | Jensen Huang rejects AI bubble fears, says Nvidia sees \u2018very different\u2019<\/a><\/p>\n The company also said that the older GPUs, like A100s, which were released in 2020, continued at high utilisation rates and retain meaningful economic value beyond the critics’ claims of two to three years.<\/p>\n Burry claimed that Nvidia is allegedly using \u201ccircular financing\u201d, and the company’s strategic investment represents a small fraction of revenue, and that the AI startups<\/a> raise capital from outside investors. Nvidia rejected these allegations, according to the report.<\/p>\n Is Nvidia like Cisco? Burry draws a parallel<\/p>\n \u2018Big short\u2019 investors Michael Burry drew a parallel between Nvidia and Cisco, a company which was prominent during the dot-com bubble of the late 1990s and early 2000s.<\/p>\n \u201cI stand by my analysis. I am not claiming Nvidia is Enron. It is clearly Cisco,\u201d said Michael Burry, cited in the news report.<\/p>\n