'Big Short' investor Michael Burry warns a 'troubling' number in Nvidia's earnings could be 'catastrophic' for its finances (www.businessinsider.com)

Michael Burry, famed for predicting the 2008 financial crisis, has raised concerns about Nvidia's financial outlook following a staggering nearly six-fold increase in its purchase obligations, which surged from $16 billion to $95 billion. In his Substack post titled "Nvidia Ratchets Up the Risk," Burry points out that this rise, driven by supplier TSMC's demands for longer contracts and cash, places Nvidia in a precarious position. He warns that if the current demand for AI chips falters, the company could face significant financial repercussions. With total supply obligations closely matching its operating cash flow, Burry asserts that Nvidia's strategy to secure supply chain capacity could result in severe risks rather than the stability typically expected in business cycles. Burry's comparison to Cisco during the dot-com bubble underscores the potential consequences of overextending purchase commitments amid uncertain demand. While Nvidia has reported impressive growth, including a 65% increase in revenue and net income, the investor argues that the inflated profit margins relying on excessive product demand could shrink rapidly. He believes that any downturn could lead to catastrophic effects on Nvidia’s earnings, emphasizing that the company's current trajectory is far from "business as usual." As the AI sector continues to evolve, Burry's caution highlights rising concerns within the AI/ML community about the sustainability of growth amid volatile market conditions.