Big Short investor Michael Burry says a new feature of the AI bubble is emerging as the OpenAI complex grabs headlines on funding issues.
In a new Substack post, Burry says times are changing as Nvidia and its CEO Jensen Huang walk back the widely reported $100 billion investment in OpenAI.
“Just this past September, markets rallied on news that Nvidia would invest $100 billion in OpenAI. This was widely reported. Now, Bloomberg reports that Jen-Hsun backtracked while talking to reporters on February 1st. Jen-Hsun let the stock market’s $100 billion interpretation stand for nearly five months. There is a CEO lie in here somewhere.”
Huang said in a recent interview in Taiwan that Nvidia never said it would invest $100 billion in OpenAI.
And it’s not just Nvidia and OpenAI. Burry also cites a report from The Register, suggesting that Oracle is having trouble funding its data center buildout.
“At the same time, The Register wrote of a report that Oracle is having trouble finding the capital to fund its data center buildout dreams. As you know, I own puts on Oracle and Nvidia.”
According to Burry, cracks are starting to appear in the AI bubble.
“We are seeing hesitancy, which has not been a feature of the AI bubble thus far.”
On top of the financial struggles, Burry says Big Tech firms continue to use accounting tricks to cook their books.
“That is not all. These companies – and Amazon too – are increasingly using finance leases to build AI infrastructure. This hides the expense from traditional capital expenditures as represented in the cash flow statement. These expenses are rather in the Finance Cash Flows and often not included in calculations of free cash flow or owners’ earnings.
For instance, including finance leases, Microsoft’s capital expenditure-to-sales ratio rises from 28% to 38%. These businesses are even more capital-intensive now than they or their analysts admit, and the whole group’s earnings are dangerously inflated. This will be revealed to all only after the fall, if history is any guide.”
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