r/valueinvesting
Burry might be right about Nvidia, but how long do we have to wait?
Author backtested NVDA's short-term momentum, worrying its predictability might collapse before the price, echoing Cisco's past crash.
- Nvidia exhibits strong short-term momentum continuation, with up and down days repeating correctly 70-75% of the time.
- Michael Burry's long-term bearish thesis on Nvidia might be correct, implying significant overvaluation.
- Nvidia's short-term predictability could quietly break down before the actual price collapse, similar to Cisco's past crash.
I've been watching what he's been saying about Cisco and Nvidia since he first put it out there. It was hard to dismiss, hard to time in the typical Burry style.
He might be right about Nvidia, but how long do we have to wait for his prediction to come true? His plays always take super long. I am a bit impatient for that long play of his, so started looking at it a bit differently and started focusing on the short term moves. Hours and between 1 and 10 days and the next session close kind of stuff.
Went down that rabbit hole for a while, which led me to grade every directional outcome against the actual next day close. Over 600 of them on Nvidia.
Up days repeated correctly about 75% of the time and down days about 70% of the time, which is good cause 50% is considered random, which is equal to a coinflip.
5 points difference between up and down, a bit tighter than I expected on a stock like this. Most high momentum stocks have a clear directional bias, Nvidia doesn't. I haven't seen that kind of balance on a stock that has been this much in the spotlight.
For someone not interested in waiting years for his long term prediction to play out that number is actually useful. If a stock resolves in the same direction the next session 70 to 75% of the time you don't need to know whether Burry is right in 2027. You just need to know what today's move is saying about tomorrow.
The thing that actually worries me is whether that consistency starts breaking down quietly before the price does. That's what happened with Cisco, their short term predictability crumbled before their collapse. A lot of people were more focused on valuation and missed the boat.
In my opinion that is what´s worth tracking, instead of waiting 2 years for his prediction to play out.
I look at it every morning now. Curious if anyone else shifted focus to the short term while all this plays out or has any other view they could share?
NVDA right now is priced like the chip demand will dry up tomorrow. If it wasn’t priced like that this shit woulda been over 300 like yesterday
Not a prediction on where nvidia will go, but if a couple of months or years is too long for you to wait, id seriously check out different subs
NVIDIA is the least diversified business. Dozens of their customers are accountable for 90% of the toral revenue - Microsoft, Google, Amazon, Tesla, SpaceX, Oracle and Meta.
NVIDIA has the most to lost from AI, because once AI demand is met nobody will spend trillions of dollars on chips annually.
AI demand may continue to grow for a long time. Jevon's paradox is real. AI will be more like energy, in that we find more and more uses for it the cheaper it becomes.
Energy is light years more universal than AI, because you can apply it everywhere, but AI, as of today, is only applicable at automating digital tasks like coding, writing emails and consolidate information from different sources.
I'm not particularly bullish on AI for the long term but AI could feasibly be deployed in some sense in every one of the scenarios in your brackets.
Haha. Your post gives me even more confidence in AI - people still think AI as a coding and editing tool. It means the vast majority don’t know what it can do yet. Great news!
The last statement around not spending on chips is ridiculous.
Do you think we will have more or less technology in the future that needs chips?
Space, compute, military, self driving, data centers, automation, robotics....
AI demand, in general, is less of a concern than just increasing competition in the chip space. Nvidia's margins are totally unsustainable.
To be clear Burry has been saying this for months because he was wrong the first time so now he’s just waiting to be vindicated. I have no idea when Nvidia will crash but I think the crash will be thirty to fifty percent as worst and I think a few years from now it can crawl back up the company is just too important and it’s not like the dot com bubble where there are no profits Nvidia is incredibly profitable and still innovating.
Burry has been saying this for years
There’s not enough cash to sustain CapEx spend beyond the next few years without insourcing chips. GOOG AMZN TSLA among others are making this move.
AI is real= make your own chips.
AI is a bubble= chips are overvalued
It’s not sustainable to spend trillion dollars annually if you don’t have the same amount of returns.
The Internet example is very good - because just like 99.9% of the planet doesn’t use more than 50MBit Internet speed (which was provided already 15 years ago) the same way 99.9% of the planet doesn’t need 50 billion AI tokens usage per day on trillion parameters model.
The "priced for perfection" argument makes sense at 36x earnings. But look at the cash conversion — $102.7B operating cash flow on $120B net income. That's not accounting fiction, it's real money.
The real question isn't whether AI demand slows (it will eventually). It's whether the market's already pricing in that slowdown. At 55% net margins, even a 20% revenue hit leaves them printing cash.
What's your timeline for the capex digestion period?