PALO ALTO, Calif. — High-profile investor Michael Burry is intensifying his critique of Nvidia, the dominant player in the artificial intelligence sector, triggering speculation about the company’s future and the broader AI market. Burry, well known for his prescient call on the housing market crash that inspired the film “The Big Short,” has amassed a following as he vocally bets against the AI boom.

Burry has taken a particularly aggressive stance against Nvidia, claiming that the company’s stock-based compensation practices have inflated costs for shareholders significantly—alleging a loss of $112.5 billion in owner earnings. He argues that companies involved in AI, including Nvidia, are propping up their financials by overstating the lifespan of their equipment. Burry contends that what appears to be a surge in customer demand could merely be a product of circular financing, in which companies are financially supported by their dealers, thus creating an illusion of growth.

His remarks have brought him into direct conflict with other industry figures, including Palantir CEO Alex Karp. After Burry disclosed his holdings of put options against Nvidia and Palantir, Karp sharply criticized Burry’s strategies, calling them “batshit crazy.” Burry’s pointed response highlighted his perception that Karp does not grasp basic financial filings. This feud underscores a growing schism in investor opinions on whether the current AI fervor is a transformative opportunity or the beginning of an unsustainable market bubble.

In response to the scrutiny, Nvidia’s investor relations team recently circulated a memo to analysts, categorizing Burry’s calculations as flawed. They emphasize that his figures misrepresent their compensation practices and assert that their financial structure aligns with industry standards. Furthermore, Nvidia staunchly refuted any comparisons to historical corporate scandals, such as Enron.

Burry, unfazed by Nvidia’s rebuttal, drew a parallel between the company and Cisco during the late 1990s. He warned that Nvidia might be overextending itself in its infrastructure investments, setting the stage for a significant stock decline if the market recalibrates its expectations.

Despite Nvidia’s impressive financial performance, with its market capitalization reaching $4.5 trillion, Burry’s commentary is attracting considerable attention. His track record includes notable successes and failures. While he famously anticipated the housing crisis, his repeated predictions of market downturns since then earned him the label of a “permabear.”

Earlier this month, Burry announced the deregistration of his investment firm, Scion Asset Management, from regulatory oversight, citing constraints that limited his ability to communicate freely. He subsequently launched a subscription newsletter titled “Cassandra Unchained,” where he plans to discuss his investment insights and critiques of the current market landscape, suggesting an active engagement in narratives surrounding technology and finance.

With the newsletter quickly gaining traction, boasting over 90,000 subscribers shortly after its launch, Burry’s warnings are resonating with a wide audience. This begs the question: Is he a harbinger of an inevitable market correction, or could his vocal doubting prompt the very collapse he fears?

Historically, influential critiques have shifted investor sentiment drastically. Prominent short-sellers have previously catalyzed declines in companies with underlying financial issues, demonstrating the impact that well-articulated skepticism can have in markets. The potential for Burry’s perspective to cause another crisis hinges not only on his predictions but on whether he can sway enough investors to act on his concerns.

As Burry continues to amplify his warnings, the stakes for Nvidia and the AI sector are undeniably high, with both potential for significant losses and pivotal shifts in market dynamics looming on the horizon. In this environment, Burry stands at a crossroads, ready to leverage his platform and voice in ways that could redefine the landscape for one of the world’s most valuable companies.