Michael Burry, the investor made famous for predicting the 2008 subprime mortgage collapse, has escalated his bearish bets against two of the AI boom’s biggest chip suppliers. According to reporting from Benzinga and TipRanks in late July 2026, Burry expanded his short position in Nvidia — adding to it when shares traded around $210.28 — and increased his short exposure to the iShares Semiconductor ETF, which includes Micron Technology among its top holdings.
The Core of Burry’s Argument
Burry’s thesis, laid out on his Substack, centers on what he calls “circular spending” reaching “biblical proportions.” His argument: Nvidia isn’t simply selling chips to independent customers with independent revenue streams. Instead, it is increasingly financing, guaranteeing, or taking equity stakes in the very companies — most notably OpenAI — that then use that capital to buy Nvidia chips. Critics who share this view argue the structure inflates apparent demand without proving that end demand for AI products can support the spending if growth disappoints.
Credit Markets Are Reacting Too
Burry’s concern isn’t purely theoretical for markets. He has pointed to a surge in credit default swap pricing tied to AI infrastructure players as evidence that bond investors are also pricing in more risk. That mirrors what happened separately with Oracle, whose CDS spreads hit their highest level since 2009 amid concerns over its debt-funded data center buildout — a parallel Burry has cited as part of a broader pattern across AI infrastructure financing. He has argued that when multiple large AI infrastructure players show rising default-insurance costs at the same time, it suggests bond investors are pricing in correlated risk across the sector rather than treating each company’s financing structure as an isolated case.
What the Nvidia-OpenAI Arrangement Actually Involves
The specific deal drawing Burry’s ire involves Nvidia discussing a roughly $250 billion financing guarantee to help OpenAI fund a massive data center project in Ohio, on top of a separate arrangement reportedly under discussion to help finance OpenAI’s purchase of up to $350 billion in Nvidia chips, according to Axios reporting from late July. OpenAI’s chief financial officer, Sarah Friar, has said the capital the company raises is used primarily to acquire GPUs from Nvidia — meaning Nvidia would, in effect, be underwriting its own customer’s ability to keep buying its products.
Nvidia and Defenders Push Back
Nvidia and its supporters reject the “circular” framing as misleading. They argue that vendor financing is a normal feature of large infrastructure buildouts across industries, and that OpenAI’s underlying compute demand — reflected in Nvidia’s forward order book, which analysts say has surged past $119 billion — is real and growing regardless of financing structure. Wall Street analysts including those at Morgan Stanley have separately urged investors to add to Nvidia positions ahead of its next earnings report, suggesting institutional sentiment remains divided rather than uniformly bearish.
Burry’s Track Record Cuts Both Ways
Burry’s history gives his warnings outsized attention, but it’s also a double-edged sword: his fund has previously taken high-profile short positions that took years to pay off, if they did at all, and some critics note that betting against Nvidia specifically has been a consistently losing trade for much of the past three years given the stock’s growth. His public disclosures don’t guarantee the timing of any downturn, only that he believes the structural risk exists.
What to Watch Next
The next concrete test comes with Nvidia’s fiscal second-quarter earnings on August 27, when analysts will scrutinize both revenue growth and any new disclosures about financing commitments to customers like OpenAI. Investors will also be watching credit default swap pricing across AI-linked debt — Oracle’s, and potentially Nvidia’s own — as a real-time gauge of whether bond markets are starting to agree with Burry’s circular-financing concerns, or whether they remain isolated to a handful of vocal short sellers. Either way, Burry’s public bet ensures that any wobble in Nvidia’s next earnings report, or in OpenAI’s ability to service the financing arrangements now under discussion, will be scrutinized against his circular-financing thesis in real time rather than treated as a routine earnings miss.