Nvidia (NVDA) Stock Drops 5% – Burry Says It Could Get Much Worse

TLDR

• Nvidia stock fell nearly 5% after its record Q4 earnings report
• Michael Burry compared Nvidia’s position to Cisco during the dot-com bubble
• Nvidia’s purchase obligations jumped to $95.2 billion, up from $16.1 billion a year ago
• Total supply obligations now stand at $117 billion, close to Nvidia’s entire annual operating cash flow
• Wall Street remains bullish, with a Strong Buy consensus and an average price target of $273.38

Nvidia (NVDA) dropped nearly 5% on Thursday despite posting record quarterly results. That kind of reaction after a blowout earnings report tends to get people talking.

NVIDIA Corporation, NVDA

The number at the center of Burry’s concern is hard to ignore. Nvidia’s purchase obligations — locked-in supply contracts it cannot cancel — jumped to $95.2 billion. That’s up from just $16.1 billion a year earlier.

To put it plainly: Nvidia has committed to buying nearly $100 billion worth of chip components before it even knows if customers will need them.

Burry’s total tally of Nvidia’s supply obligations sits at $117 billion. That figure nearly matches the company’s entire annual operating cash flow.

The Cisco Comparison

Burry’s historical parallel is direct. He compares Nvidia’s current position to Cisco during the dot-com bubble of 2000 and 2001.

Cisco locked in massive supply orders expecting 50% annual growth to continue indefinitely. When demand dropped, Cisco was buried in excess inventory. Its stock eventually lost more than 80% of its value.

Burry argues Nvidia could be walking a similar path. He also suggested Nvidia isn’t freely choosing these long-term, non-cancellable orders. He believes TSMC is pushing for longer commitments and upfront payments as it expands capacity.

CFO Colette Kress confirmed that inventory rose 8% quarter over quarter and that Nvidia has locked in supply capacity well beyond its normal planning window. For Burry, that’s another red flag.

Wall Street Sees It Differently

Most analysts aren’t buying the bearish case. Top names at Bank of America, Morgan Stanley, and RBC all raised their price targets on NVDA after Q4 earnings while keeping Buy ratings in place.

The Street’s consensus is that Nvidia’s supply commitments are a sign of strength, not risk. The view is that the company is securing its position ahead of surging AI demand.

That’s the core tension in this story. Burry believes the market is confusing a supply boom with durable long-term demand — the same mistake made during the dot-com era. Analysts believe the demand is real and lasting.

The numbers on the bullish side are still hard to argue with. Nvidia posted record quarterly results, and analysts hold a Strong Buy consensus based on 37 Buy ratings, one Hold, and one Sell over the past three months.

The average price target sits at $273.38, implying roughly 48% upside from current levels.

Whether that upside materializes may come down to one question: is AI demand as durable as the supply commitments Nvidia has now made to meet it?

Nvidia’s total purchase obligations currently stand at $95.2 billion, up nearly sixfold from $16.1 billion just one year ago.

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