It is hard to tell if people like Jensen actually know anything or if they are grasping for justifications after a decision has been made, regardless of wheter it is positive or negative for the stock. As for Burry, since deregistering his so-so hedge fund he's started a substack and reportedly has 25,000 subscribers paying $400 per year, so good on him.
From Business Insider, November 28:
- Michael Burry has warned AI giants are overstating how long their Nvidia chips will stay relevant.
- Bridgewater's Greg Jensen said the chips may be used to invent better chips that make them obsolete.
- While Burry has warned about circular deals in AI, Jensen said Nvidia is building an ecosystem.
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....
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Regarding the depreciation schedules for Nvidia's chips we were babbling about such things back in May before the commentariat became au courant.
Here we were using Nvidia's development cycle as a reason it might not result in China winning World War III if they got their hands on some cutting-edge-but-not-bleeding-edge chips:
"Nvidia Orders 300,000 H20 Chips From TSMC Due to Robust China Demand, Sources Say" (NVDA; TSM)
*****
....Which raises a second question. Is this story, here via UPI July 28, but also available on some of the tech sites, is this story already moot?Security experts warn against selling Nvidia AI chips to China
In letter to Commerce secretary, they say H20 AI chips can be used to support China's military.Twenty national security experts and former government officials are urging the Trump administration to reverse a decision earlier this month to let Nvidia resume selling H20 AI chips in China.
They wrote a letter Monday to Commerce Secretary Howard Lutnick, saying that the decision announced two weeks ago was a "strategic misstep that endangers the United States' economic and military edge in artificial intelligence (AI) -- an area increasingly seen as divisive in the 21st-century global leadership."....
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As noted exiting from May 18's "U.S. Still Mulling Whether To Allow Nvidia To Sell One Million+ Most Powerful Chips To UAE":
On the one hand with that many chips floating around that part of the world there is no way to keep a bunch of them from ending up in China. On the other hand, Nvidia's development cycle is focused on releasing new, more powerful chips every 12 -14 months meaning the current smoking hot H100 chips will have been superseded by two cycles at the end of the contract period.The first point, that chips will get to China is borne out by the recent news that $1 billion worth of chips had been smuggled into China in three months after the export ban on the more powerful Nvidia chips.
note: the smuggled chips were not the ones destined for the UAE.
The second point is that the real technology transfer deterrent is in the pace of NVDA's development cycle.Although there are hiccups—most recently server racks overheating from the amazing amount of electricity flowing through the systems—the overarching goal is an almost metronomic rhythm to the development of new chips such that the H20s will be out-dated in under 2 1/2 years.
That said, even outdated GPUs have economic value. It's not as though they decompose into their constituent elements, leaving a pile of silica to be swept up.
