‘Big Short’ investor Michael Burry warns the US will lose the AI race to China if it banks on Nvidia’s ‘power hungry’ chips

• Michael Burry criticized Nvidia for marketing its “power-hungry” artificial intelligence microchips over alternatives.

• The “Big Short” investor warned that the United States will lose to China in the artificial intelligence race if it relies on Nvidia’s chips.

• Burry raised questions about the longevity of Nvidia’s chips, its “mutually beneficial deals” and compensation.

Michael Burry said Nvidia is pushing the idea that making graphics chips that consume more and more power is the best way to advance artificial intelligence, and the result may be that the United States loses to China in the artificial intelligence race.

“Totally true and pathetic,” Burry wrote on Saturday night’s X, in response to another user’s comment that called Nvidia a “gangster in the AI ​​community” for “shutting down any narrative that even hints at reducing the need for GPUs.”

In another article over the weekend, Burry shared a chart showing that China has more than twice the power generation capacity of the United States and is expanding its energy infrastructure at a faster pace.

Nvidia defines AI innovation as “just figuring out how to power and cool bigger, hotter chips,” Burry said. But China’s huge lead in building energy means U.S. companies are “plowing capital into a race that they are structurally destined to fail.”

Burry said the U.S. needs to shift its focus from developing increasingly “power-hungry” chips to advancing “AI-tuned ASICs” – application-specific integrated circuits designed to complete specific tasks quickly and efficiently.

But he said Nvidia has “a fatal grip on development” thanks to agreements with many key players in the artificial intelligence industry.

Nvidia did not immediately respond to Business Insider’s request for comment on Burry’s post.

Nvidia’s stock price has soared more than 12 times since the beginning of 2023, making it the world’s most valuable public company with a market value of $4.4 trillion.

In the first nine months of this year, the chipmaker generated about $148 billion in revenue and $77 billion in net profit. “Blackwell sales are breaking records and cloud GPUs are sold out,” Nvidia CEO Jensen Huang said in its third-quarter earnings report.

Burry, who chronicled his contrarian bets on the U.S. housing bubble in the book and movie “The Big Short,” recently switched from running a hedge fund to writing on Substack.

He demonstrates to readers that Nvidia and other artificial intelligence companies are inflating a historic technology bubble. He has said Nvidia’s customers have exaggerated the useful lives of their chips to delay depreciation and boost short-term earnings.

Burry also criticized Nvidia’s “give and take” deals with chip buyers such as OpenAI and Oracle, and criticized Nvidia’s stock compensation as being too high.

Nvidia previously responded to his criticism in a memo to Wall Street analysts that was quickly leaked. Burry countered that the document was “one straw man after another” and stood by his analysis.

Responding to a follow-up comment on his Substack, Burry wrote that Nvidia has “become too much of a spotlight.” While the company’s response did make him “consider delving deeper,” he said it was a “relatively small short” for him.

“I believe it will go down, purely as a result of my overall thesis, but it’s not the worst of it.”

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