● Burry warns Nvidia earnings inflated, SBC eats buybacks, owner earnings halved
Michael Burry’s Warning: The Nvidia Earnings ‘Exaggeration’ Debate, Big Tech SBC Risks, and Investment Checkpoints from Tesla to Palantir.
Key Points to Check Out in Today’s Article.
We clearly summarize, like a news report, the heart of Burry’s claim that Nvidia’s stock-based compensation (SBC) has offset the share repurchase effect, reducing ‘owner earnings’ to about half.
We interpret the less-covered concepts by other media—’Net Issuance Yield’ and ‘SBC Tax Cash Outflow’—from a practical investment perspective.
We simply compare Tesla’s annual dilution rate and the risk of oversized compensation packages, as well as Palantir’s persistent dilution structure, based on numbers.
We connect the impact of changes in interest rates and dollar conditions on semiconductor/big tech valuations with the overcapacity risk in the AI infrastructure cycle.
We provide a ready-to-use checklist and positioning ideas.
News Summary: A Timeline of Burry’s Recent Three Messages.
1) Warning Against Overcapacity in Hardware Infrastructure: Concerns were first raised that the data center and semiconductor investment boom, led by Nvidia, could lead to a ‘supply glut’ reminiscent of the dot-com bubble.
2) Issue of Extended Depreciation Period: It was noted that by extending the useful life of data center/semiconductor equipment from 3 years to 6 years, short-term costs are reduced and earnings may appear inflated.
3) Stock-Based Compensation (SBC) Focus: In his latest article, Burry argued that Nvidia’s SBC has essentially been used to offset dilution from share repurchases, significantly reducing the real earnings accruing to shareholders.
Nvidia Key Issues: GAAP vs. Adjusted Earnings, Share Repurchases, SBC, Tax Cash Outflow.
According to Burry, Nvidia’s cumulative GAAP net income and adjusted net income since 2018 are approximately 205B and 226B, respectively.
Adjusted earnings exclude items such as SBC from expenses, which in practice results in a ‘higher’ figure.
The problem is that the ‘owner earnings’ that return to shareholders may differ from these numbers.
Nvidia spent roughly 91B on share repurchases over the same period, yet the number of outstanding shares in 2018 and now appear similar, according to Burry.
This implies that share repurchases were largely used not to enhance existing shareholder value but to offset the dilution caused by SBC.
He also points out that due to the structure in which the company pays the withholding tax on SBC grants in cash, there has been an additional cash outflow of about 21B since 2018.
Burry argues that when considering these two cash outflows, the true benefit experienced by shareholders should be viewed as roughly 50–56% of the reported figures.
While acknowledging that this is not an accounting issue or financial statement manipulation, the key point is that the economic substance of the earnings may appear ‘exaggerated.’
Guide to Interpreting the Numbers: What to Accept as Fact and How to Use It.
Please note that the figures and ratios above are based on ‘Burry’s calculations and assertions.’
Investors should look not only at GAAP net income, adjusted earnings, and FCF, but also at per-share metrics and ‘net issuance yield’ to minimize misinterpretation.
It is not the total amount of share repurchases that is key, but rather the net result of changes in the number of issued shares.
If the number of issued shares decreases, the value per share rises, and if it increases, dilution occurs.
Even if there are many share repurchases, if the net issuance is positive, actual shareholder value may not increase.
SBC tax cash outflow: When a company pays the withholding tax on RSUs/options in cash, FCF decreases and owner earnings are reduced.
Cash outflows are better identified in the cash flow statement and notes than in the income statement.
Vesting Cliff (Large Vesting Events): If significant vesting occurs in a particular quarter, dilution and tax outflows may simultaneously expand.
Buyback Efficiency: High-priced repurchases can increase inefficiency, and if used solely to offset dilution, the ‘per-share value enhancement’ effect is weakened.
FCF Per Share: The trend in ‘FCF per share’ provides a more accurate reflection of tangible value than total FCF.
Practical Checklist: Commonalities Across Nvidia and Big Tech.
1) Check the trend in the number of issued shares and the annual dilution rate.
2) Examine whether the ratios of SBC/sales and SBC/operating cash flow are on the rise.
3) Estimate the net effect of share repurchases (cancelled shares vs. new issuance) and the average repurchase price.
4) Monitor the cash outflow related to RSU withholding tax and quarterly vesting schedules.
5) Determine whether changes in depreciation periods create a short-term ‘illusion’ regarding margins and FCF.
6) Track AI Capex ROI, customer diversification, and competitors’ launch timelines (e.g., custom ASICs, alternative accelerators).
Consideration of Risks and Counterarguments.
SBC can reduce cash outflows and help secure talent, thus fostering long-term growth.
If high growth continues, value creation may outweigh the dilution.
There is also room for valuation re-assessment should semiconductor cycles turn upward, or if interest rates drop and the dollar weakens.
Positioning Ideas (For Information Purposes).
Maintain a positive view based on growth, but take a conservative approach by increasing weight only when improvements in per-share metrics are confirmed.
For major semiconductor stocks such as Nvidia, it is important to monitor whether the net issuance yield approaches zero or turns negative.
For Tesla and Palantir, the period before or after a slowdown in dilution or an announcement of share repurchases could present a more favorable risk/reward symmetry.
Simultaneously monitor how macroeconomic variables—interest rate direction, inflation trends, and dollar index fluctuations—impact big tech multiples.
Conclusion: Translating Burry’s Message into ‘Investment Language’.
The key is not how large the earnings are, but rather how much per share actually remains in your hands.
Once you recalculate owner earnings taking into account SBC and tax cash outflows alongside the net effect of share repurchases, a different picture emerges of current semiconductor and big tech valuations.
While there may be debates over the numbers, institutionalizing this checklist can undoubtedly aid in risk management and capturing timing opportunities.
< Summary >
Burry asserts that Nvidia’s SBC and tax cash outflows have essentially offset share repurchases, making the earnings accruing to shareholders appear only about half as large.
The key point is to focus on ‘net issuance yield’ and ‘FCF per share’—the message is to look at owner earnings rather than simple earnings.
Tesla and Palantir also face high annual dilution rates, so pauses in dilution or transitions to share repurchases become crucial catalysts.
Macroeconomic factors such as interest rates, the dollar, and inflation will amplify semiconductor and big tech multiples and must be monitored concurrently.
[Related Articles…]
A Comprehensive Overview of the AI Semiconductor Cycle and Interest Rate Risks.
*Source: [ 내일은 투자왕 – 김단테 ]
– 마이클버리 “엔비디아 이익 2배 뻥튀기 됐다!”
● AI Code Red, Yen Blowup, Tesla Rebound, Food Fury
OpenAI ‘Code Red’, End-of-EN Carry Liquidation Warning, Tesla’s China Rebound, and the Second Wave of Food Inflation: Today’s True Points of Global Markets and the AI War
This article contains four key points.
- The performance and distribution war between Google and OpenAI, where ‘Code Red’ signals a shift in the AI business landscape.
- The impact pathway of Japan’s EN Carry trade liquidation on global markets, exchange rate forecasts, and interest rate volatility.
- Tesla: the reality behind the rebound in China versus sluggish performance in Europe, with FSD and robotics linking to actual performance conditions.
- The structural re-heating of food inflation, the palpable slowdown in U.S. consumer spending, and the ripple effects spreading over the market.
Below, the news unfolds quickly, and the overlooked key points from other sources are gathered and punctuated.
Keywords such as global markets, the U.S. economy, rate cuts, inflation, and exchange rate forecasts provide context until the end.
New York Exchange Briefing: A Typical ‘Yesterday’s Decline – Today’s Rebound’ Led by AI, Aviation, and Platforms
At the beginning of trading according to broadcast standards, the Nasdaq started slightly higher, recovering some of the previous day’s losses across all three major indexes.
Nvidia, which is sensitive to AI, led the sentiment, while Boeing showed strength in the data/cloud (Oracle, Palantir) and cyclical sectors.
CrowdStrike and Marvel’s earnings were mentioned due to calendar issues, opening a section that confirms the demand for security and communication semiconductors in the AI cycle.
Big tech had a mixed start, but narratives such as the Santa Rally expected during the year-end season and bets on rate cuts after the peak in interest rates provided a floor for the indexes.
For reference, mentions related to the end of QT and the re-expansion of liquidity are based on broadcast sources, and the actual policy schedule should be rechecked through official announcements.
Escalation of the AI War: OpenAI ‘Code Red’ and Reports of Google’s New Model Surpassing Benchmarks
According to reports, news spread that the benchmark of Google’s latest Gemini series model had surpassed OpenAI, triggering a ‘Code Red’ alert within OpenAI.
At the same time, news surfaced about monetization options under review, such as low conversion from free to paid and the possibility of introducing ads to free users.
The key is not just performance, but also ‘distribution.’
Google can immediately connect its distribution pipelines through search, Android, and YouTube, while OpenAI defends its position through APIs, partners, and enterprise contracts.
The AI contest is swiftly shifting from model scores to battles over usage frequency, built-in defaults, and costs (inference expense).
Corporate clients are driven by price, security, and integration, while consumers follow defaults at the search box and mobile OS level.
Therefore, the performance variables for AI-driven stocks should be analyzed by looking at indicators of “distribution/cost/bundled sales” along with the “rate of performance improvement.”
Tesla: China’s November Sales Rebound vs. Europe’s Negative Growth, and the Real World Connection of the FSD/Robotics Story
According to reports, Tesla’s sales in China for November reached approximately 86,700 units, marking about a 10% increase year-on-year and a 41% surge month-on-month.
However, the cumulative figure from January to November shows an approximate 8% decrease compared to last year, indicating annual negative growth remains.
In Europe, some countries observed significant declines in the 40–60% range, showing no clear signs of recovery.
In contrast, in China, BYD exhibits clear strength with about 480,000 units per month, demonstrating advantages in pricing, lineup, and localization.
Elon Musk reiterated the message that “AI and robotics create overwhelming value,” but for this to structurally contribute to the stock price, in the short term sales and margins, in the medium term resolution of FSD regulations and data transfer issues, and in the long term the commercialization trajectory of humanoids are necessary.
In summary, while the story (robo-taxi/robot) may help the multiples trend upward, the critical determinants are the continuous momentum of China sales, signals of a rebound in Europe, and progress on local regulations for FSD.
EN Carry Trade Liquidation Risk: The Crucial Chain of Exchange Rates, Interest Rates, and Quant Positions
The basic mechanism of the EN Carry trade is the borrowing of low-interest Japanese yen → conversion into dollars or other currencies → investment in risky assets → maximizing leverage and interest rate differential profits.
If expectations for policy normalization by the Bank of Japan (such as interest rate hikes and YCC adjustments) grow, the pressure for liquidation of positions may increase due to rising borrowing costs and increased costs for currency hedging.
Liquidation typically proceeds in the order of “a surge in the yen → selling of global risky assets → a jump in volatility → reduction in CTA and risk parity positions.”
However, in this cycle, prior warnings have accumulated, so the shock may gradually become dispersed.
The investment checklist consists of three points:
- The volatility of USDJPY (e.g., VVYEN) and the speed of narrowing the U.S.–Japan interest rate gap.
- The exposure sensitivity of mega-caps and quant funds (targeting volatility and reducing risk parity positions).
- The connection between U.S. Treasury supply and exchange rate forecasts (changes in Japanese funds’ positions in U.S. bonds).
From a portfolio perspective, practical steps include tail hedging with JPY calls (for a rising yen), increasing hedging ratios on risky assets, and managing the duration for interest rate-sensitive sectors.
Second Wave of U.S. Food Inflation: A Mismatch of Livestock, Coffee, Climate, and Wages
Since 2020, data shows that the price of beef steaks has surged by approximately 55%, and overall food prices including coffee and home consumption have risen significantly.
Repeated supply-side shocks have hit due to factors such as reduced cattle numbers from drought and disrupted coffee harvests from heavy rains in Brazil.
There is also criticism that real median income has essentially stagnated over the past five years, and election economics highlight how inflation’s impact on consumer sentiment and political landscapes is spreading.
Consumption is diverging between the upper and lower classes, and the shift towards discount channels, private brands, and refill models may accelerate.
For industries sensitive to input costs (such as restaurants, processed food, and raw food materials), price pass-through capability, inventory turnover, and customer retention are key inflection points in performance.
USPS and the ‘Address=Identity’ Structure: The Hidden Bottleneck in U.S. Administration and Finance
Due to the absence of a centralized resident registration system in the U.S., a “physical address” acts as a gateway in education, finance, licensing, and judicial administration.
USPS serves as a quasi-governmental agency that handles the nation’s physical nervous system, from tax notifications to court communications and financial fee notices.
Without an address, one is likely to be pushed “outside the system” in financial KYC, and the financial inclusion of vulnerable groups is structurally limited.
For fintech and banks, automating address verification and residency proof, as well as digital identity and postal integration (e-address) solutions, offer opportunities to simultaneously reduce costs, fraud, and onboarding time.
From a policy perspective, linking digital IDs with postal infrastructure is emerging as a lever that can lower social costs.
Jovi Aviation: Sell Report Points and Checklist
In one analyst report, Jovi’s target price was lowered to $10, accompanied by a sell recommendation.
The core argument is that issues with battery energy density relative to aircraft weight constrain range, payload, and overall economics, while high regulatory and certification hurdles delay commercial operations.
Concerns over cash burn and the risk of additional fundraising were also repeatedly pointed out.
Conversely, the upside factors include FAA certification milestones, the actual monetization of partnerships with the Department of Defense and airlines, and the speed at which a pilot/maintenance ecosystem is established.
The overall eVTOL sector is highly volatile in terms of narrative, so without clarity on “regulatory timelines, urban infrastructure, and insurance premiums,” it is challenging to re-rate the multiples.
Today’s Calendar & Strategy: A Triple-Pronged Approach of Earnings, Macro, and Positioning
On the calendar front, the earnings of security and semiconductor companies (CrowdStrike, Marvel) will provide clues on the capacity for AI infrastructure CapEx and cybersecurity budgets.
Macro-wise, monitoring both the EN Carry trade issue and the Federal Reserve’s communications is essential, as one weighs bets on rate cuts against the scenario of re-heated inflation.
From a positioning standpoint, increasing currency hedging, using call spreads when volatility declines, and employing a barbell strategy between AI core (semiconductors, cloud) and defensive (consumer staples) baskets are effective.
While the short-term resilience of global markets remains, secondary shocks from exchange rate forecasts, oil prices, and food prices could create subtle fissures in reopening-type consumer sectors.
Key Points Not Covered in Other YouTube/News Outlets
- In AI, distribution and cost are the real game, not performance. Who secures the default in search, OS, and browsers will determine 80% of the conversion to paid and monetization.
- The liquidation of the EN Carry trade starts with an exchange rate event and ends with ‘quant deleveraging.’ The chain runs from a sudden move in USDJPY → targeting volatility and reducing risk parity positions → expanding volatility in mega-caps.
- For Tesla, the upside of FSD in China faces the hurdle of ‘data sovereignty.’ Without resolving issues related to data transfer and local map/HD road infrastructure, scaling the algorithm is limited.
- USPS acts as a hidden infrastructure that influences the costs of KYC in finance. Linking digital IDs with the postal network could reduce the structural costs associated with financial fraud and onboarding delays.
- Food inflation is recursively driven by the ‘livestock cycle + climate.’ Recovery in cattle numbers takes a long time, and weather shocks are hard to absorb through inventories. Do not underestimate the medium-term upward risk of consumer price pressures.
< Summary >
- New York markets rebounded, with sentiment recovering primarily due to AI, aviation, and security stocks.
- OpenAI’s ‘Code Red’ signals a shift from mere performance competition to a battle over distribution and costs.
- Tesla’s China sales rebounded while Europe lagged. The FSD/robotics narrative will only boost the stock price if tied to sales, margins, and regulatory progress.
- The risk of EN Carry trade liquidation propagates from exchange rates → quant deleveraging → mega-cap volatility. Check currency hedges and tail hedging strategies.
- Structural upward pressure on food inflation is intensifying consumption divergence.
- The USPS ‘address=identity’ structure is a hidden bottleneck crucial for financial inclusion and fintech opportunities.
- For Jovi, regulatory hurdles, economic efficiency, and cash flow are key, with certification milestones acting as critical variables.
[Related Articles…]
AI Trend Report: How Distribution and Cost are Decisive in the Model War
EN Carry Trade Liquidation and Exchange Rate Forecasts: A Guide to the USDJPY Volatility Chain Reaction
*Source: [ Maeil Business Newspaper ]
– 조비에비에이션, 매도 리포트 나와ㅣ오픈AI, 내부에 ‘코드 레드’ 경보 발령ㅣ엔캐리 트레이드 청산 우려 커져ㅣ홍키자의 매일뉴욕ㅣ홍키자의 매일뉴욕
