Famed investor Michael Burry, famously portrayed by Christian Bale in “The Big Short,” has launched an increasingly aggressive campaign against Nvidia and the broader artificial intelligence (AI) boom. This battle is drawing significant attention as Burry, now equipped with a growing audience and freedom from regulatory constraints, possesses the potential to become the catalyst for the very collapse he is predicting. Unlike other warnings about an AI bubble, Burry is not only betting against the AI boom but is also actively trying to convince his followers that Nvidia, the perceived emperor of the AI space, has no clothes.

The central question now circulating is whether Burry can generate enough doubt to significantly hobble Nvidia and, by extension, other key players in this narrative, including OpenAI. Burry has intensified his efforts in recent weeks, publicly criticizing Nvidia and engaging in a notable spat with Palantir CEO Alex Karp. This interaction followed regulatory filings that revealed Burry held bearish put options on both companies, a bet exceeding $1 billion on their potential decline. Karp publicly dismissed Burry’s strategy as “batshit crazy,” to which Burry retorted by mocking Karp’s understanding of SEC filings. This public disagreement encapsulates the market’s current divide: is AI a transformative force justifying immense investment, or are we in a period of mania destined for a harsh correction?

Burry’s allegations against Nvidia are specific and stark. He contends that Nvidia’s stock-based compensation has cost shareholders $112.5 billion, effectively halving “owner’s earnings.” He has also suggested that AI companies are manipulating their financial books by decelerating the depreciation of equipment, particularly Nvidia’s GPUs, which he believes are rapidly losing value. Burry posits that Nvidia’s customers are overstating the useful lives of these GPUs to justify inflated capital expenditures. Furthermore, he describes the reported customer demand as a “mirage,” arguing that AI customers are being “funded by their dealers” through a circular financing scheme.

Despite Nvidia’s substantial market power and a recent blockbuster earnings report, the increasing number of references to Burry’s warnings compelled the company to respond. Nvidia’s investor relations team circulated a seven-page memo to Wall Street analysts, as first reported by Barron’s, refuting Burry’s claims. The memo asserted that Burry’s calculations were flawed, specifically highlighting his incorrect inclusion of RSU taxes, stating the actual buyback figure was $91 billion, not $112.5 billion. Nvidia also maintained that its employee compensation practices were “consistent with peers” and emphatically denied any comparison to Enron.

Burry swiftly clarified his position, stating that he was not equating Nvidia to Enron. Instead, he drew a parallel to Cisco Systems in the late 1990s, a company that overbuilt infrastructure which ultimately proved unnecessary at the time, leading to a 75% stock price collapse when the market recognized this oversupply.

While this financial contention could dissipate over the next year, its potential impact remains significant. Nvidia’s stock has surged twelvefold since early 2023, propelling its market capitalization to $4.5 trillion, marking the fastest ascent to becoming the world’s most valuable company. However, Burry’s own track record is complex. He gained widespread acclaim for accurately predicting the 2008 housing crisis. Yet, since 2008, he has consistently forecasted various market apocalypses, earning him the moniker “permabear” from critics. Those who followed his advice with cult-like devotion often missed significant bull runs. For instance, Burry intelligently invested in GameStop early but sold his shares before the meme stock explosion, and he incurred substantial losses by shorting Tesla. His fund even experienced investor exodus after his astute housing crisis call due to subsequent prolonged underperformance.

Earlier this month, Burry deregistered his investment firm, Scion Asset Management, with the SEC, citing “regulatory and compliance restrictions that effectively muzzled my ability to communicate” and expressing frustration over misinterpretations of his tweets on X. Last weekend, he launched a Substack newsletter titled “Cassandra Unchained,” which he now uses as his primary platform to openly prosecute his case against the entire AI industrial complex. The newsletter, priced at $400 for a yearly subscription, is described as Burry’s “sole focus as he gives you a front row seat to his analytical efforts and projections for stocks, markets, and bubbles, often with an eye to history and its remarkably timeless patterns.” The initiative has rapidly gained traction, attracting 90,000 subscribers in less than a week.

This brings us back to the truly unsettling question: Is Burry a “canary in the coal mine,” foreshadowing an inevitable market collapse, or could his fame, historical track record, newfound unrestricted voice, and rapidly expanding audience actively trigger the very implosion he is predicting? History provides precedents for such a phenomenon. Jim Chanos, a renowned short seller, did not invent Enron’s accounting fraud, but his high-profile criticisms in 2000 and 2001 empowered other investors to question the company, thereby accelerating its downfall. Similarly, prominent hedge fund manager David Einhorn’s detailed exposé of Lehman Brothers’ accounting irregularities at a 2008 conference intensified investor skepticism, likely hastening the loss of confidence that led to its collapse. In both instances, genuine underlying problems existed, but a credible critic with a significant platform created a crisis of confidence that became a self-fulfilling prophecy. If a sufficient number of investors believe Burry’s warnings about AI overbuilding, they will sell. This selling will validate his bearish thesis, prompting more investors to sell. Burry doesn’t need to be right about every minute detail; he only needs to be persuasive enough to ignite a market stampede.

While Nvidia’s November performance might suggest Burry’s warnings are gaining traction, the stock’s year-long performance makes this less clear. What is unequivocally evident, however, is that Nvidia has an almost incomprehensibly massive market cap and its position as the most indispensable company of the AI age at stake. Conversely, Burry stands to lose only his reputation, now amplified by a new megaphone he intends to use at full volume for the foreseeable future, making this a high-stakes confrontation for the global financial markets.