Michael Burry has taken substantial short positions against Nvidia through puts with a notional value of nearly $187 million, arguing that the company’s financials are distorted by accounting dilution and what he calls a circular financing scheme that inflates real demand. At the same time, Peter Thiel exited his entire position in Q3 2025—a sale of 537,742 shares worth roughly $100 million—fueling broader concerns about a potential AI bubble. Nvidia, however, maintains confidence, pointing to strong earnings and upbeat guidance that have kept the debate alive and markets volatile.
NVIDIA under scrutiny as Burry and Thiel intensify bubble concerns
Burry centers his criticism on stock-based compensation (SBC), the extension of asset useful lives by hyperscalers, and an alleged “circular financing scheme” supporting AI demand. Stock-Based Compensation (SBC) refers to equity-based payments recorded as non-cash expenses under ASC 718.
He claims that cumulative dilution totals $112.5 billion since 2018, far above the $20.5 billion reported, arguing that despite $112.5 billion in buybacks, shares outstanding have still increased by 47 million. According to Burry, this dynamic reduces real earnings by about 50% and paints “a picture of fraud, not a flywheel.”
Burry also alleges that depreciation changes at Meta and Google could understate costs by $176 billion between 2026 and 2028, while asserting that “end demand is ridiculously small” and that many customers are financed by the very vendors selling them hardware, creating a loop that may not be sustainable.
Thiel’s complete reduction of his Nvidia exposure—valued at roughly $100 million—added reputational weight to the debate. Many view his exit as strategic profit-taking and risk reduction amid concerns of overheated AI valuations.
Nvidia countered the bearish narrative with exceptionally strong results, reporting Q3 2025 revenue of $57.01 billion versus expectations of $55.19 billion and guiding FY Q4 2026 revenue to around $65 billion. CEO Jensen Huang emphasized explosive GPU demand, the migration away from CPUs, and the acceleration of AI agent adoption, stating that “Blackwell sales are off the charts” and that cloud GPUs are effectively sold out. The company also highlighted PwC audits and full GAAP compliance to reinforce confidence in its accounting.
Market reaction has been highly volatile—sell-offs after Burry and Thiel’s moves, followed by a rebound on Nvidia’s results and speculation about potential short squeezes. The clash between fundamental strength and bubble warnings has introduced meaningful uncertainty for institutional portfolios.
Ultimately, the debate pits concerns about accounting, dilution, and artificial demand against Nvidia’s dominant ecosystem, including CUDA and an estimated ~80% market share in AI infrastructure. For institutional investors, the takeaway is clear: risk management now requires closer tracking of earnings quality, customer financing flows, and exposure to potential systemic vulnerabilities, not just headline growth.