TLDR
- Nvidia stock fell nearly 5% despite posting record-breaking quarterly earnings results
- Famed investor Michael Burry compares Nvidia’s approach to Cisco’s failed dot-com strategy
- Nvidia’s purchase obligations exploded to $95.2 billion, up from just $16.1 billion last year
- Total supply commitments hit $117 billion, nearing the company’s annual operating cash flow
- Wall Street maintains bullish outlook with Strong Buy consensus and $273.38 price target
Nvidia (NVDA) experienced a nearly 5% stock decline on Thursday despite delivering impressive quarterly results. The counterintuitive market reaction—stellar performance met with selling pressure—has raised eyebrows across the investment community.
The selloff gained momentum after Michael Burry, the investor famous for forecasting the 2008 housing market crash, published a critical analysis on his Substack platform. Burry characterized Nvidia’s supply chain obligations as “concerning” and warned that weakening demand could create a “catastrophic” scenario affecting margins and balance sheet strength.
The number triggering Burry’s concerns is eye-opening. Nvidia’s purchase obligations—contractual agreements the company must fulfill—exploded to $95.2 billion. Compare that to the $16.1 billion reported just one year earlier.
Put another way: Nvidia has committed to buying approximately $100 billion worth of semiconductor supplies and manufacturing capacity with no guarantee that end-market demand will materialize.
According to Burry’s analysis, Nvidia’s complete supply commitments total $117 billion. This figure approaches the entire annual operating cash flow generated by the chip giant.
“This is far from ordinary business operations,” Burry noted.
Echoes of the Cisco Disaster
Burry pulls no punches in his historical comparison. He explicitly compares Nvidia’s situation to Cisco’s downfall during the 2000-2001 technology bubble burst.
Cisco made massive supply commitments based on assumptions that 50% annual growth rates would continue indefinitely. When demand evaporated, Cisco was left holding worthless inventory. The networking giant’s shares eventually crashed over 80%.
Burry argues Nvidia could be traveling a similar path. He further suggests these lengthy, irrevocable commitments aren’t completely voluntary. In Burry’s view, TSMC is requiring extended contracts and upfront payments as it expands manufacturing capacity.
CFO Colette Kress disclosed that inventory grew 8% quarter-over-quarter and confirmed that Nvidia has locked in supply capacity well beyond normal planning timeframes. For Burry, these statements support his thesis.
Analysts Maintain Bullish Stance
Most Wall Street analysts disagree with this bearish assessment. Major investment banks including Bank of America, Morgan Stanley, and RBC increased their NVDA price targets after the Q4 earnings release while reaffirming Buy ratings.
The mainstream analyst view treats Nvidia’s supply obligations as prudent planning rather than reckless overcommitment. The consensus interpretation suggests the company is securing critical resources ahead of massive AI infrastructure expansion.
This captures the core debate. Burry believes the market is confusing a temporary supply bubble for sustainable long-term demand—the same error that characterized the dot-com mania. Analysts argue that AI-driven requirements possess genuine longevity.
The optimistic case carries substantial weight. Nvidia posted record results, and analysts hold a Strong Buy consensus based on 37 Buy ratings, one Hold, and one Sell rating from the past three months.
The average price target sits at $273.38, implying roughly 48% upside from current price levels.
Whether those gains materialize hinges on a single crucial question: will AI demand prove as durable as the supply commitments Nvidia has locked itself into?
Nvidia’s total purchase obligations now stand at $95.2 billion, marking nearly a six-fold surge from the $16.1 billion figure reported twelve months ago.
