Michael Burry Sounds Alarm on Nvidia (NVDA) After 5% Stock Plunge

TLDR

• NVDA shares declined almost 5% following a record-breaking Q4 earnings announcement
• Investor Michael Burry drew parallels between Nvidia’s strategy and Cisco’s dot-com era mistakes
• Purchase obligations at Nvidia soared to $95.2 billion from $16.1 billion year-over-year
• Combined supply commitments reached $117 billion, approaching Nvidia’s total yearly operating cash flow
• Analyst sentiment stays optimistic with Strong Buy ratings and a $273.38 average target price

Shares of Nvidia (NVDA) tumbled close to 5% on Thursday following what should have been a celebration-worthy quarterly earnings announcement. When a company delivers stellar numbers yet sees its stock crater, it naturally sparks intense scrutiny.

NVIDIA Corporation, NVDA

The figure driving Burry’s alarm is startling. Purchase obligations at Nvidia—binding supply agreements the company cannot walk away from—skyrocketed to $95.2 billion. Just twelve months ago, that number stood at only $16.1 billion.

In simpler terms: Nvidia has locked itself into purchasing nearly $100 billion in semiconductor materials and components without certainty that customer demand will justify it.

Burry calculates Nvidia’s total supply commitments at $117 billion. That amount comes remarkably close to equaling the chipmaker’s full-year operating cash flow.

The Cisco Comparison

Burry doesn’t mince words when drawing historical lessons. He directly likens Nvidia’s current circumstances to Cisco’s predicament during the 2000-2001 dot-com collapse.

Cisco committed to enormous supply purchases on the assumption that 50% yearly growth would persist forever. When the market cooled, Cisco found itself drowning in unsellable inventory. The company’s stock price ultimately plummeted more than 80%.

Burry contends Nvidia may be headed down a comparable road. He also suggests these extended, non-cancellable commitments aren’t entirely voluntary. According to Burry, TSMC is demanding longer-term agreements and advance payments as it scales production capabilities.

CFO Colette Kress acknowledged that inventory levels climbed 8% from the previous quarter and confirmed that Nvidia has secured supply capacity extending far beyond typical planning horizons. To Burry, these admissions validate his concerns.

Wall Street Sees It Differently

The majority of Wall Street analysts reject this pessimistic outlook. Leading firms including Bank of America, Morgan Stanley, and RBC elevated their NVDA price projections following the Q4 report while maintaining Buy recommendations.

The prevailing analyst perspective frames Nvidia’s supply obligations as strategic foresight rather than dangerous overreach. The consensus interpretation is that the company is locking down resources ahead of explosive AI infrastructure buildout.

This represents the fundamental disagreement at play. Burry contends the market is mistaking a temporary supply surge for sustainable long-term consumption—identical to the miscalculation that defined the dot-com bubble. Analysts counter that AI-driven demand has genuine staying power.

The bullish case remains numerically compelling. Nvidia delivered record quarterly performance, and analysts maintain a Strong Buy consensus rating derived from 37 Buy recommendations, one Hold, and one Sell rating issued within the last three months.

The consensus price target stands at $273.38, suggesting approximately 48% appreciation potential from present trading levels.

Whether that gain materializes depends entirely on one critical question: will AI demand prove as enduring as the supply commitments Nvidia has now locked in to satisfy it?

Nvidia’s aggregate purchase obligations currently total $95.2 billion, representing nearly a sixfold increase from $16.1 billion recorded one year prior.

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