'Big Short' investor Michael Burry warns a 'troubling' number in Nvidia's earnings could be 'catastrophic' for its finances

Core Viewpoint - Nvidia is in a precarious position regarding its microchip supply obligations, which could lead to significant financial repercussions if demand for AI products declines, as highlighted by investor Michael Burry [1][5]. Group 1: Supply Obligations and Financial Risks - Nvidia's purchase obligations surged from approximately $16 billion to $95 billion over 12 months, driven by TSMC's demand for longer contracts and upfront cash [2]. - The company's total supply obligations of $117 billion are nearly equivalent to its operating cash flow for the year ending January 25, indicating a tight financial situation [2]. - Burry emphasizes that Nvidia's current strategy of locking in supply chain capacity is unprecedented and poses substantial risks [2][4]. Group 2: Historical Comparisons and Market Dynamics - Burry draws parallels between Nvidia's situation and Cisco during the dot-com bubble, where Cisco faced severe losses after overcommitting to supply chain obligations amid a sudden drop in IT spending [3]. - The high profit margins Nvidia currently enjoys are attributed to strong demand, but these margins could diminish if demand weakens, increasing the company's vulnerability [4]. Group 3: Market Performance and Investor Sentiment - Despite a 65% increase in revenue and net income over the past year, Nvidia's stock fell nearly 3% recently, reflecting investor concerns [7]. - Nvidia's stock has decreased by 8% from its all-time highs in October but remains over 13 times higher since the beginning of 2023, maintaining its status as the world's most valuable public company with a market capitalization of $4.6 trillion [8].