Michael Burry warns Nvidia's power-hungry AI chips could hand China the edge in global AI race

Too much power, too much risk? Big Short investor Michael Burry says Nvidia chips could hand AI edge to China

Investor Michael Burry cautions that Nvidia's focus on powerful, energy-intensive AI chips could hinder America's global AI race. He highlights China's significant energy generation capacity and rapid expansion as a key advantage. Burry suggests the US should shift towards more efficient AI-tuned chips. This comes as Nvidia's stock surges amid the AI boom. Michael Burry, the investor made famous by betting against the US housing market ahead of the 2008 crash, is warning that Nvidia's approach to artificial intelligence could put the United States at a disadvantage in the global AI race, particularly against China. In a series of posts on X over the weekend, Burry criticized Nvidia's push toward ever more powerful and energy-hungry graphics chips, arguing that the strategy ignores a critical weakness: America's power infrastructure. Responding to a user who described Nvidia as the "gangster of the AI neighborhood" as it has "shut down any narrative that even hints at reducing GPU demand", Burry replied, "Exactly and sadly," as quoted by Business Insider. Also read: 401(k) at retirement: Move it, leave it, or lose out? The decision that can cost you thousands Burry pointed to China's vast energy advantage to make his case. In another post, he shared a chart showing that China has more than double the electric generation capacity of the United States and is expanding its power infrastructure at a far faster pace. That gap, he suggested, could give China the upper hand as AI systems demand increasing amounts of electricity. According to Burry, Nvidia has framed AI progress as a problem of "just figuring out how to power and to cool bigger, hotter silicon," as quoted by Business Insider. But he warned that US companies are"plowing capital into a race it is structurally positioned to lose," given China's ability to rapidly build power sources to support large-scale AI deployments. Also read: Married with matching paychecks? These 3 Social Security strategies could add thousands to retirement Instead, Burry said the US should pivot away from increasingly power-hungry GPUs and focus on developing "AI-tuned ASICs," or application-specific integrated circuits, which are designed to perform specific tasks more efficiently, as per the Business Insider report. He argued that these chips could offer a more sustainable path forward, but claimed Nvidia maintains a "death grip on development" through its deals with key players across the AI ecosystem. The critique comes as Nvidia sits at the center of the AI boom. The company's stock has surged more than twelvefold since the start of 2023, making it the world's most valuable publicly traded company with a market capitalization of about $4.4 trillion. In the first nine months of this year, Nvidia generated roughly $148 billion in revenue and $77 billion in net income. CEO Jensen Huang recently said that demand for the company's Blackwell chips is soaring and that cloud GPUs are effectively sold out. Burry, who now writes on Substack after stepping away from running a hedge fund, has increasingly positioned himself as a skeptic of the AI rally. He has argued that Nvidia and other AI-related companies are inflating a historic tech bubble. Among his criticisms, Burry has claimed that Nvidia's customers have overstated the useful life of chips to stretch depreciation schedules and boost short-term earnings. He has also taken issue with what he describes as "give-and-take" arrangements between Nvidia and major customers such as OpenAI and Oracle, and has criticized Nvidia's stock-based compensation as excessive. Nvidia previously addressed his concerns in a memo to Wall Street analysts that later leaked, prompting Burry to respond that the document relied on "one straw man after another." Despite his sharp words, Burry has suggested Nvidia is only part of a broader thesis. Replying to a comment on his Substack, he said the company had "become too much of a focus," adding that while he believes the stock will fall, it represents a relatively small short position for him. Burry wrote, "I believe it will fall, and is a pure play on my overall thesis, but it is not the worst out there," as quoted by Business Insider. Why does Burry think China has an advantage? China has more than double the electric generation capacity of the US and is expanding faster. What does Burry say about US AI investment? He warned that US companies are investing heavily in a race they are structurally positioned to lose.

Michael Burry Says China Has Structural Edge In AI As Nvidia's 'Power Hungry' Chips Outpace US Energy Grid - NVIDIA (NASDAQ:NVDA)

Michael Burry, the investor famous for predicting the 2008 financial crisis, has said that China's rapidly accelerating power-generation buildout gives it a structural edge in artificial intelligence if the industry continues relying on increasingly energy-intensive chips. China's Power Advantage Is Growing Faster, Not Just Bigger Burry sounded the alarm over the weekend in a series of posts on X, pointing to a chart showing China's installed electricity generation capacity has surged far beyond that of the U.S. and Europe since the early 2000s. "It is not just the total power advantage," Burry wrote. "It is the slope." Burry said the U.S. is on the wrong path if its AI strategy continues to rely on increasingly energy-intensive Nvidia Corp (NASDAQ:NVDA) chips. "Power hungry Nvidia chips are not the way forward," he wrote. See Also: Nvidia Stock Dips After Oracle Snub: Larry Ellison Calls It 'Chip Neutrality' Nvidia's AI Roadmap Tied To Rising Energy Demand In a follow-up post, Burry argued that Nvidia's dominant role in AI computing has locked the industry into a path of higher power consumption. "Nvidia's development roadmap is essentially a power consumption roadmap," he stated, adding that innovation has increasingly become about "how to power and to cool bigger, hotter silicon." He said efficiency improvements have failed to keep pace with the sheer growth in computing being deployed, pushing electricity needs ever higher. US Grid Constraints Versus China's Build-At-Will Model Burry contrasted China's infrastructure push with what he described as a decelerating U.S. transmission buildout. "U.S. transmission grid development is actually decelerating due to permitting issues, while China is building transmission at will to match power output," he said. That mismatch, he warned, leaves U.S. companies investing heavily in an AI arms race they are "structurally positioned to lose" if power-hungry scaling remains the dominant strategy. A Call For A Shift Away From Brute-Force AI Scaling Burry said the U.S. must pivot away from brute-force approaches centered on massive data centers and instead focus on more efficient designs. "The U.S. needs to get away from bigger and bigger power-hungry chips and innovate with AI-tuned ASICs like nobody's business," he wrote. Burry said Nvidia has a "death grip" on AI development in the U.S., citing its extensive investments and agreements with many major AI companies and startups. Burry Raises Valuation Concerns As Nvidia's Market Cap Soars Burry has been stirring debate by alleging that Nvidia may be employing accounting tactics to artificially boost its valuation. The company currently has a market cap of $4.40 trillion, making it the most valuable company in the world. In October, the Jensen Huang-led company became the first to reach the $5 trillion market cap milestone. Year-to-date, Nvidia has gained 30.86% while in the past five years the stock has risen by 1,293.30%, according to Benzinga Pro. Nvidia posted third-quarter revenue of $57.0 billion, representing a 62% increase from a year earlier and exceeding the Street consensus estimate of $54.88 billion. The company also reported earnings per share of $1.30, topping analysts' expectations of $1.25. The results marked Nvidia's 12th consecutive quarter of beating Wall Street estimates on both revenue and earnings, with quarterly revenue reaching a new record. Benzinga Edge Rankings place Nvidia in the 97th percentile for growth, with further metrics available that compare its performance against peers like AMD and INTC. Read Next: Space Stocks 2025 Year In Review: Rocket Lab Executes, SpaceX IPO Ahead? Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. Photo courtesy: Shutterstock NVDANVIDIA Corp$181.380.22%OverviewMarket News and Data brought to you by Benzinga APIs