- Burry drew parallels to Cisco securing large supply commitments in 2000 and 2001, noting that when demand tumbled, the company was left with excess inventory.
- Nvidia’s Chief Financial Officer, Colette Kress, stated in a post-earnings call with analysts that the company’s inventory has increased 8% quarter-on-quarter.
- Burry noted that Nvidia’s comments imply that the company is committing to purchase large amounts of supply before knowing how strong future demand could be.
Michael Burry on Thursday warned that Nvidia Corp.’s (NVDA) “purchase commitments” are akin to the ones announced by Cisco Systems Inc. (CSCO) at the top of the dot-com bubble.
According to a CNBC report citing Burry’s latest Substack newsletter, “The Big Short” investor pointed out that there is a surge in Nvidia’s purchase obligations, which rose to $95.2 billion at the end of the fourth quarter (Q4), compared to $16.1 billion a year ago.
“This is not business as usual. This is risk. Back in 2000-2001, Cisco extended purchase commitments with its suppliers to ensure capacity for that 50% annual growth Cisco expected,” Burry said, according to the report.
Nvidia’s shares were down nearly 5% in Thursday morning’s trade. Retail sentiment on Stocktwits around the company trended in the ‘extremely bullish’ territory at the time of writing.
This is the fifth instance in the past eight quarters in which Nvidia’s shares have declined the day after the company’s results.
Parallels To Cisco’s Supply Commitments
Burry drew parallels to Cisco securing large supply commitments in 2000 and 2001, noting that when demand tumbled, the company was left with excess inventory.
Notably, Nvidia’s Chief Financial Officer Colette Kress stated in a post-earnings call with analysts that the company’s inventory has increased 8% quarter-on-quarter, while adding that Nvidia had “strategically secured inventory and capacity to meet beyond the next several quarters, further out in time than usual.”
Burry noted that Nvidia’s comments imply that the company is committing to purchase large amounts of supply before knowing how strong future demand could be.
He added that while the increase in inventory last year was driven by an export control shock, the current spike appears to be structural. “What is happening now is not temporary. It is no export shock. It is not even external. This is coming from within the business plan,” Burry said, according to the report.
JPMorgan Says Concerns Over Nvidia’s 2027 Growth Likely Overblown
Analysts at JPMorgan stated in a recent note following Nvidia’s Q4 earnings that concerns over the company’s growth prospects in 2027 are likely overblown, according to TheFly. The firm raised its price target for Nvidia to $265 from $250 while keeping an ‘Overweight’ rating on the stock.
BofA analysts also echoed the optimistic sentiment, raising their price target for Nvidia to $300 from $275, while maintaining a ‘Buy’ rating. The firm stated that Nvidia’s supply commitments at $95 billion ensure that the company “may well be the most dependable supplier that can serve the AI market.”
Nvidia reported earnings per share (EPS) of $1.62 on revenue of $68.13 billion in Q4, compared to Wall Street’s estimates of an EPS of $1.54 on revenue of $66.23 billion, according to Fiscal.ai data.
The company guided for first-quarter (Q1) revenue of $78 billion, plus or minus 2%, while the consensus estimate is $75.87 billion, according to Fiscal.ai.
NVDA stock is up 0.6% year-to-date and 43% over the past 12 months.
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