TLDR
- NVDA shares declined almost 5% following a record-breaking Q4 financial report
- The Big Short investor Michael Burry drew parallels between Nvidia’s situation and Cisco’s dot-com era collapse
- Purchase obligations at Nvidia skyrocketed to $95.2 billion from $16.1 billion year-over-year
- Combined supply obligations have reached $117 billion, nearly equivalent to Nvidia’s yearly operating cash flow
- Analysts maintain optimistic outlook with Strong Buy rating and $273.38 average target price
Despite delivering exceptional quarterly performance, Nvidia (NVDA) experienced a nearly 5% decline on Thursday. When a stock drops after stellar earnings, it raises eyebrows across the market.
The decline was partially driven by a stern warning from Michael Burry, the hedge fund manager who gained fame for accurately predicting the 2008 financial crisis. Through his Substack platform, Burry described Nvidia’s supply chain position as “troubling,” suggesting that any deceleration in demand could prove “catastrophic” for both profits and financial stability.
The figure driving Burry’s alarm is substantial. Nvidia’s non-cancellable purchase obligations have surged to $95.2 billion from merely $16.1 billion twelve months prior.
In simpler terms: Nvidia has contractually obligated itself to purchase approximately $100 billion in chip materials without certainty that customer demand will materialize.
Burry calculates Nvidia’s comprehensive supply obligations at $117 billion—a figure that approaches the company’s total annual operating cash generation.
“Not business as usual,” Burry stated.
The Cisco Comparison
Burry’s historical reference is unambiguous. He draws a comparison between Nvidia’s present circumstances and Cisco’s position during the 2000-2001 dot-com crash.
Cisco committed to enormous supply contracts anticipating perpetual 50% yearly expansion. When market demand evaporated, Cisco found itself drowning in unsold inventory. The company’s stock ultimately plummeted by over 80%.
Burry contends Nvidia may be following a comparable trajectory. He further suggests these extended, non-cancellable commitments aren’t voluntary decisions by Nvidia. Instead, he believes TSMC is demanding longer-term agreements and advance payments as it builds out manufacturing capacity.
CFO Colette Kress acknowledged that inventory levels increased 8% from the previous quarter and confirmed Nvidia has secured supply capacity extending far beyond typical planning horizons. To Burry, this represents yet another warning signal.
Wall Street Sees It Differently
The majority of financial analysts reject the pessimistic interpretation. Leading firms including Bank of America, Morgan Stanley, and RBC elevated their NVDA price projections following the Q4 report while maintaining Buy recommendations.
The prevailing Wall Street view positions Nvidia’s supply commitments as strategic positioning rather than vulnerability. The interpretation suggests the company is proactively securing resources ahead of accelerating artificial intelligence demand.
This represents the fundamental disagreement at play. Burry contends the market is mistaking a supply expansion for sustainable long-term consumption—identical to the dot-com miscalculation. Analysts counter that AI demand represents genuine, enduring growth.
The bullish case remains statistically compelling. Nvidia delivered record-breaking quarterly performance, and analyst consensus shows a Strong Buy rating supported by 37 Buy recommendations, one Hold, and one Sell across the past three months.
The consensus price target stands at $273.38, suggesting approximately 48% potential appreciation from present trading levels.
Whether that upside proves achievable may hinge on a single critical question: does AI demand possess the durability to match the supply commitments Nvidia has now locked in?
Nvidia’s aggregate purchase obligations presently total $95.2 billion, representing nearly a sixfold increase from $16.1 billion one year earlier.
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