Michael Burry, the investor noted for predicting the 2008 housing crash, echoed similar warnings regarding the credit exposure surrounding the semiconductor giant.
Burry revealed he holds sizable short put positions on Nvidia, citing total dependence on hyperscaler capital expenditure.
"There is a reason $NVDA's 5 year credit default swaps are going parabolic," said Burry. "All this overreaching by #nvda to push the circular spending to biblical proportions."
Financial metrics show the cost of five-year credit default swaps—contracts that insure against corporate debt default—has approximately doubled for Nvidia over a two-month span, signaling elevated market anxiety.
"The market has voted and the results are clear," said Burry.
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Industry Perspectives
Nvidia Chief Executive Officer Jensen Huang previously addressed the central role his company plays across the technological landscape during an internal meeting in November.
"We're basically holding the planet together — and it's not untrue," said Huang.
Wall Street analysts offer differing perspectives on the structural exposure.
Wolfe Research senior analyst Chris Caso noted that while Nvidia and Broadcom Inc. are taking on long-term liabilities by backstopping financing for AI projects, Nvidia's robust cash flow provides a buffer.
"That part of it is less good, because there's some liability on there," said Caso.
"That liability is probably far in the future, but that part I'm less comfortable with."
Nvidia recently formed a partnership with SK Group for a $500 billion AI factory initiative and is reportedly in discussions to backstop nearly $250 billion to assist OpenAI in leasing data center compute capacity.
