Michael Burry warned Nvidia stock looks vulnerable and the AI “tokenmaxxing” trend won’t last in two recent Substack posts.
“The conditions for an aggressive fall are as strong as they have been in the history of the stock,” Burry wrote in a Monday post.
The investor of “The Big Short” fame — known for making prescient calls and dire predictions — added that Nvidia’s next decline could be “more dramatic” than its last three big crashes of 56% in 2018, 67% in 2021, and 43% in 2025.
Burry said his view was based on options and stock market volume as well as fundamentals. He noted that trading volumes of Nvidia stock, on a 50-day moving average basis, are at their “lowest since 1999.” He added that there’s a “dearth of hedging activity” because it’s cheaper to buy put options on Nvidia than for similar stocks.
He said that if Nvidia stock does fall, he expects “very few buyers on the way down” due to insufficient structural demand and market makers having to back off.
In a Friday post, Burry flagged that Nvidia’s customer concentration is “off the charts,” exposing it to a major revenue hit if its biggest buyers pull back.
Nvidia’s recent earnings showed that its top three customers were responsible for 64% of its accounts receivable, up from 56% in the preceding quarter, he noted.
Burry also pointed out that its No. 1 customer accounted for more of Nvidia’s accounts receivable, but less of its revenue, for the first time in 13 quarters.
“This is not quite a smoking gun, but more of a finding of a finger on the trigger,” he wrote.
Burry suggested Microsoft pulled forward inventory that it “does not really need” as it’s slowing down its data-center buildout, because it wanted to keep its priority spot for Nvidia’s next chip, or Nvidia pushed inventory forward to flatter its earnings.
He said that could pave the way for a “wicked bullwhip,” referring to how a small change in customer demand can reverberate through a supply chain and have a more pronounced effect on suppliers.
Burry has previously said he’s betting against Nvidia and other high-flying AI stocks, and has repeatedly singled out the chipmaker as particularly vulnerable if the AI boom falters.
Demand is set to slow
Burry called out “tokenmaxxing,” or companies encouraging employees to use AI models as much as possible, as a “crazy, rushed, temporary phase.”
“Tokenmaxxing is not merely heavy AI use, and it is certainly not sustainable AI use,” he said. “It is quota-driven, leaderboard-driven, management-mandated overconsumption.”
Burry argued the trend won’t support the AI industry long term, as “everyone is already using it, and many are using it as frantically and expensively as possible during this mass training phase.”
He warned that the “market is capitalizing the most expensive phase of AI adoption as if it were normal and indicative of future demand.”
“Nvidia is releasing new chips every year, data centers are being put up as fast as possible, power plants are being built as fast as possible, and external demand is already compressing,” he added.
Nvidia didn’t immediately respond to a request for comment outside normal business hours.