Michael Burry of “The Big Short” fame has said some of the world’s largest AI companies are exaggerating how long their Nvidia chips will last to pad their short-term profits. Now, one hedge fund boss has warned that those chips could make themselves obsolete.
Greg Jensen, the co-chief investor of Ray Dalio’s Bridgewater Associates, told the “In Good Company” podcast this week that the “depreciation schedule is probably going to be quite fast, and you hope it has to be in a sense.”
Jensen explained there’s a “resource grab” in AI as companies compete for scarce land, energy, microchips, and scientists, and tech bosses are hoping AI itself can help.
“One of the things they have to do is figure out how to make the chips more efficient, make the energy more efficient, and they’re trying to use AI to do those things,” he said.
Jensen predicted that some of the scientific advances that will “depreciate the current assets will come from those assets themselves,” as “AI will generate better ways to do this.”
Puts, deals, and ecosystems
Burry shot to fame after his massive bet against the US housing bubble was immortalized in the book “The Big Short,” and a movie adaptation starring actor Christian Bale as Burry.
He resurfaced on X in late October after more than two years of silence. Since then, he has sounded the alarm on an AI bubble, closed his hedge fund to outside cash, launched a Substack to share his research, and disclosed he owns bearish put options on Nvidia and another AI darling, Palantir.
Burry has taken aim at the AI giants for dragging out depreciation from around three years to six years or longer, pointing out that Nvidia is releasing new chips faster and faster, so the current generation will likely lose value more quickly.
“The hyperscalers have been systematically increasing the useful lives of chips and servers, for depreciation purposes, as they invest hundreds of billions of dollars in graphics chips with accelerating planned obsolescence,” he wrote on Substack this week.
The investor has also called out the sprawling web of “give-and-take deals” between AI companies.
Jensen said those aren’t a product of “normal bubble dynamics” — companies juicing their financials to justify their lofty valuations — as “Nvidia can get as much revenue as it wants” given the immense demand for its chips.
Instead, Jensen said, Nvidia is scrambling to create its own ecosystem of buyers who won’t develop their own chips, in an attempt to stop Alphabet from owning the entire AI “stack.”
“They’re like Standard Oil in the Gilded Age, trying to create monopolistic control on things,” Jensen said about Nvidia. He added that “everybody’s got to lock up who do I partner with, where am I going to get my chips and power — and if I don’t do it, I’m going to die.”
Jensen also said the AI investment boom isn’t a typical capital cycle, as bosses such as Elon Musk and Sam Altman believe they’re in a race to develop a supreme intelligence, and are willing to spend whatever it takes to win.
