Michael Burry Quotes 1968 Book in Nvidia Depreciation Dispute

Insider Monkey·6 Oct 2026·Read original

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Semiconductors & Semiconductor Equipment

Summary · why it matters

Michael Burry answered Nvidia's defense of its chip depreciation schedule on October 4 by quoting a 1968 passage from Adam Smith's "The Money Game," arguing the market has dismissed the same accounting objection before. The dispute centers on how long Nvidia's chips hold their value: Burry argues large buyers depreciate the chips over five to six years when the economic life is closer to two or three, flattering their earnings, while Nvidia sent analysts a memo naming him directly and arguing four to six years is right because older chips keep earning rental income. The question does not touch Nvidia's own earnings, since Nvidia sells the chips and a longer assumed life flatters the buyer's income statement rather than the seller's; Nvidia reported a 66.24% operating margin on revenue growing 105.90%, with net income of $192.88 billion and levered free cash flow of $41.81 billion. Nvidia traded near $238 on October 5, is worth $5.45 trillion, up 26.09% over twelve months, and carries a 28.51 times trailing and 24.88 times forward earnings multiple, with short interest at 1.27% of the float. Burry's argument is not that Nvidia's numbers are wrong but that the replacement cycle, which both sides turn on, is an empirical matter rather than a rhetorical one.