🦢 The risk of a dot-com bubble repeat.

Michael Burry, who predicted the 2008 mortgage crisis, is sounding the alarm on Nvidia and drawing parallels with Cisco at the peak of the dot-com bubble.

He believes that Nvidia is trapping itself with huge commitments that could turn into a disaster with even a slight slowdown in demand.

➠ Over the past 12 months, Nvidia's purchase commitments have grown from $16b to $95b —almost six times. Most of these contracts are non-cancelable: the company has to pay even if demand decreases.

➠ The key factor is TSMC – a major chip manufacturer. The company requires long-term contracts and upfront payments to expand capacity. Nvidia is forced to "reserve" large volumes even before demand is fully understood.

➠ Total supply commitments have reached ~$117b —almost equal to the company's entire annual operating cash flow. In simple terms, all earnings for the year are already spoken for in advance.

➠ This was exactly the approach Cisco used in the late 90s—actively reserving volumes from suppliers, expecting ~50% annual growth. When corporate IT spending suddenly plummeted, Cisco wrote off 40% of its commitments and inventories, and its stock collapsed and never recovered to previous highs.

➠ If demand for AI chips begins to decline, Nvidia will find itself in a similar situation with a mountain of non-cancelable contracts and sharply reduced profits.

➠ Let’s remember, enthusiasts on Twitter have long considered the possibility of a "dot-com bubble" scenario, comparing Nvidia and Cisco stock charts.

P.S. The story of Michael Burry's success was made into the film "The Big Short" (.