Two investors with very different track records just said the same thing about the stock market's hottest name.
Mark Cuban, the tech billionaire and former "Shark Tank" star, and Michael Burry, the investor of "The Big Short" fame, are both pointing at Nvidia with concern. Their worry is not about the chips themselves. It is about how Nvidia is selling them.
Nvidia has been financing its customers' purchases of its own graphics chips for data centers. In plain English: Nvidia is providing financing to companies so they can buy Nvidia products. That creates what Cuban and Burry call a "circular spending" loop. Nvidia props up demand for its chips by essentially paying for the other side of the deal.
Cuban compared it to the dot-com bubble, but instead of companies going public with no profits, Nvidia itself is acting as the bank. "This is so analogous to the dot com burst. "But instead of IPOs, Nvidia is the 'ipo,' funding everyone and anyone"," he said. Burry added that Nvidia is pushing "circular spending to biblical proportions."
The market has started to notice. That is a serious pullback for a stock that had roughly multiplied 13-fold since the start of 2023.
The dot-com era had a famous problem: easy money propped up companies that did not have real businesses. When the money dried up, a lot of them collapsed.
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Cuban and Burry see a similar pattern here. Nvidia is the one supplying the cash to its customers. Those customers - OpenAI, Microsoft, CoreWeave, SK Hynix - are spending billions on Nvidia chips to build out AI infrastructure.
That infrastructure may or may not turn into a profitable business. If it does not, the buyers could stop paying. And if they stop paying, Nvidia is left holding the bag.
Burry pointed to a market signal that backs up the concern. The cost of five-year credit default swaps protecting against Nvidia default has roughly doubled in two months, a clear sign that investors see higher risk.
Jensen Huang, Nvidia's CEO, seems aware of how central his company has become. "We're basically holding the planet together - and it's not untrue," he said.
Cuban put it bluntly: "One breakthrough in another chip provider, or a misstep, and it all could crumble. It's truly scary." He did not say that is going to happen. He just said the whole system depends on Nvidia staying on top.
The big question for anyone who owns Nvidia stock - or has been thinking about buying it - is whether this financing loop is a real risk or just a normal business move.
Cuban has also expressed concern during a podcast, saying firms are constructing AI data centers that will eventually become much more efficient, leading to surplus capacity. He joked that many of those facilities may end up as pickleball courts.
Burry, who disclosed in January that he had taken a short position in Nvidia due to its "entirely dependent on hyperscaler spending," updated on July 24 that he increased that short, holding bearish puts "in good size." Burry argues that a significant share of Nvidia's demand doesn't come from final users, that much of it is funded and remains hidden from its financial statements, and that most anticipated income relies on a circular financing arrangement.
Neither is predicting an instant crash. They are warning that the current setup is fragile.
For investors, the lesson is not to panic and sell. It is to understand what you own. If you hold Nvidia, you are betting not just on chip demand but on the idea that the customers Nvidia is financing will actually make money someday. That is a bigger bet than it looks like on the surface.
The AI boom is real. The spending is massive. But when the people who lived through the last big bust start drawing comparisons, it pays to listen.
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