Michael Burry, the renowned investor, has publicly questioned Nvidia's financial strategies, specifically pointing to the substantial amount the tech giant has spent on share repurchases over the past few years. He contends that despite a massive investment of $112.5 billion in buybacks since 2018, these efforts have not translated into genuine shareholder value, primarily serving to counteract dilution from stock-based compensation (SBC).
Burry's analysis underscores a discrepancy between Nvidia's significant financial outlays for buybacks and its growing share count. He observes that Nvidia's $20.5 billion in stock-based compensation since 2018, when viewed against the $112.5 billion in buybacks, indicates that these repurchases were largely a defensive measure. This strategy, according to Burry, has masked the true financial picture for long-term investors, suggesting that the company's "owner's earnings" are not as favorable as they might appear.
This critical assessment comes at a time when Nvidia continues to dominate the market, largely propelled by its leadership in artificial intelligence. The company recently reported impressive third-quarter results, with record revenue, and its CEO, Jensen Huang, emphasized the widespread impact of AI. Despite Burry's concerns, Nvidia's shares have outperformed the broader market this year, reflecting continued investor confidence in its growth trajectory and its strategic investments in the AI ecosystem.
Nvidia's journey exemplifies the complexities of corporate finance in a rapidly evolving tech landscape. While the company's market performance remains strong, Burry's perspective highlights the importance of scrutinizing how corporate financial decisions truly impact long-term value creation. It encourages a deeper look beyond surface-level metrics, advocating for transparency and genuine growth strategies that truly benefit all stakeholders.