Gotrade News - Legendary investor Michael Burry is raising red flags on Nvidia once again, despite the chipmaker's blowout quarterly results. In a Substack post titled "Nvidia Ratchets Up the Risk" on Thursday (26/02), Burry zeroed in on a steep jump in Nvidia's purchase obligations, which ballooned from roughly $16 billion to $95.2 billion over the past 12 months.
He pulled that figure straight from Nvidia's fiscal 2026 Form 10-K annual filing. According to Burry, the surge reflects non-cancellable supply contracts locked in to secure semiconductor fabrication and advanced packaging capacity.
Key Takeaways:
- Nvidia's purchase obligations grew nearly sixfold in a single year, creating structural downside risk if AI demand cools off
- Burry drew a parallel to Cisco's dot-com era collapse, when the networking giant wrote down roughly 40% of its supply chain commitments
- Wall Street remains firmly bullish with price targets up to $300, yet NVDA shares slid over 4% after the earnings report
The supplier at the center of this is Taiwan Semiconductor Manufacturing Company (TSMC), which has been demanding longer contracts and upfront cash. That's the price of building out the capacity needed to produce Nvidia's next-gen chips.
Burry stressed that Nvidia is now placing non-cancellable orders well before actual end demand is confirmed. "This is not business as usual. This is risk," he wrote, as quoted by Business Insider.
The Cisco Playbook From the Dot-Com Era
Burry drew a pointed comparison to Cisco during the dot-com bubble in the early 2000s. Back then, Cisco ramped up purchase commitments with suppliers to keep pace with the 50% annual growth it was banking on.
But when enterprise IT spending dried up almost overnight, Cisco was forced to write down around 40% of its supply chain obligations. The stock got hammered in the aftermath.
Burry noted that Nvidia's total supply obligations of $117 billion nearly match its operating cash flow for the full year. In plain terms, if AI demand takes a hit, the fallout could be brutal for Nvidia's balance sheet.
"Any downturn, when it comes, will be more severe, perhaps even catastrophic, for Nvidia's earnings and balance sheet," Burry wrote. He also pointed out that Nvidia's fat profit margins are largely a byproduct of pricing power driven by excessive demand.
Wall Street Is Bullish, but the Market Isn't Buying It
On the flip side, Nvidia's quarterly numbers were nothing short of impressive. According to Finbold, the company posted $68.13 billion in revenue, beating the $66.21 billion consensus, with earnings per share hitting $1.62 versus the $1.53 estimate.
Several heavyweight Wall Street firms doubled down on their bullish calls. Bank of America's Vivek Arya bumped his price target from $275 to $300, while JPMorgan, Morgan Stanley, William Blair, and KeyBanc all kept their Buy-equivalent ratings with 12-month targets ranging from $260 to $275.
Yet the market told a different story. NVDA shares dropped over 4% to $187.5, a clear signal that strong earnings alone aren't enough to keep sentiment afloat, not even for AI's poster child.
All told, Nvidia's revenue and net income each grew 65% year-over-year to $216 billion and $120 billion, respectively. Business Insider reported the company also projected revenue growth this quarter could reach as high as 80% annually.
Nvidia still holds the crown as the world's most valuable public company with a $4.6 trillion market cap. But Burry's warning serves as a reminder that behind the jaw-dropping growth numbers, structural risks could end up steering where the stock heads next.
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Reference:
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Finbold, ‘Big Short’ Michael Burry explains why he still finds Nvidia stock ‘troubling’. Accessed on February 27, 2026
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Business Insider, 'Big Short' investor Michael Burry warns a 'troubling' number in Nvidia's earnings could be 'catastrophic' for its finances. Accessed on February 27, 2026
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