Nvidia's AI Boom Reliance Sparks Warning from Mark Cuban and Michael Burry

Mark Cuban and Michael Burry have expressed concern over Nvidia's role in the AI boom. The two investors believe that Nvidia is acting as a 'backstop' for its customers, financing their purchases of graphics chips for data center buildouts.

Cuban likened Nvidia to the IPOs during the dot com bubble, stating that instead of going public, Nvidia is funding everyone and anyone. He warned that if Nvidia makes a misstep or there's a breakthrough in another chip provider, 'it all could crumble'.

Nvidia has struck deals worth hundreds of billions of dollars with numerous players in the AI ecosystem. Cuban expressed concern that the chipmaker is so deeply intertwined with its customers that if it runs into problems, the damage could spread far and fast.

Burry also warned about Nvidia's overreaching, stating that its 5-year credit default swaps are 'going parabolic' due to a greater risk of Nvidia failing to meet its financial commitments. He believes that Nvidia is engaging in 'circular spending' to push the AI boom to 'biblical proportions', which could lead to widespread fallout.

Both Cuban and Burry have taken aim at aspects of the AI boom in recent weeks, cautioning about overbuilding AI infrastructure, excessive debt, and the potential for obsolescence. Nvidia's shares were trading 2% lower on Wednesday, down 18% from their May peak but still up around 13-fold since the start of 2023.