'Get out' of Nvidia stock, Michael Burry says

Michael Burry, the investor of "The Big Short" fame. Bloomberg/Getty Images Michael Burry says Jensen Huang's exit will deal a heavy blow to Nvidia, and investors should sell their shares before the company hits the skids.Huang resigned as the AI chipmaker's CEO on Thursday morning following fresh reports about two alleged extramarital affairs.After it emerged on Wednesday that Nvidia's board was considering ousting Huang, Burry — who has been publicly betting against Nvidia for many months — laid out in a Substack post why he expected Nvidia to suffer without Huang in charge.Huang has "orchestrated" Nvidia's efforts to expand the AI ecosystem, Burry wrote. He pointed to its huge investments in AI stocks, and its use of special vehicles and hidden debt to finance customers' purchases of its chips, creating "tremendous leverage in the system."He also claimed that Huang pushed customers to buy chips they didn't need yet by threatening to reduce their allocations in the future.Without Huang at Nvidia's helm, the "cash may cease to flow," and investments could dry up or be written off, Burry wrote.Customers will be free to "slow down deals, push back, renegotiate terms, or simply walk to a competitor without fear of offending" the chip chief, he continued."Nvidia's business will not disappear, but its growth may slow and, critically, its margins may fall," Burry added."The terms of trade and the architecture of financing were the secret sauce that supercharged an already dominant technology," he wrote, adding that it will "take time for this Byzantine web to untangle and unwind." "Nvidia bulls will have another fluffy big chance to get out," Burry added. "Get out."Nvidia stock plunged at the start of trading on Thursday and has seen a near-35% drop from its $ 243-per-share peak in early October.Burry, who shot to fame after his prescient bet against the mid-2000s housing bubble was featured in the book and movie "The Big Short," pivoted from running a hedge fund to writing about his personal investments last year.He's one of several commentators who soured on Nvidia in recent days.Bernstein Research's Stacy Rasgon downgraded the stock to "Market Perform" and halved his price target to $200 in a research note before Huang's resignation.In a Bloomberg TV interview, he warned of more bad press and regulatory scrutiny, questioned whether Nvidia could find a CEO as visionary as Huang, and flagged the risk of an employee exodus.Oppenheimer's Rick Schafer downgraded Nvidia to "Perform" and removed his price target in a Wednesday research note.He wrote that Huang plays a crucial role as the "face of AI," his leadership has been "critical to Nvidia's success," and the company has "massive shoes to fill and no obvious successor."He added that Huang's exit could spark a "brain drain" and result in a "lingering share overhang."Nvidia's directors have appointed the company's finance chief, Colette Kress, as interim CEO while they search for a permanent replacement for Huang. Read next Business Insider tells the innovative stories you want to know Business Insider tells the innovative stories you want to know Business Insider tells the innovative stories you want to know Business Insider tells the innovative stories you want to know Theron Mohamed is a London-based correspondent on the International team at Business Insider. His coverage spans finance, investing, wealth, markets, and the economy.Theron joined BI in 2019 as a reporter at Markets Insider and rose to the rank of correspondent before moving to the Trending team then the broader International team. He previously covered tech, media, and telecom stocks for Investors Chronicle magazine and had a brief stint on the Financial Times' Data team. He interned at the Wall Street Journal in New York where he primarily wrote for Heard on the Street.Theron has freelanced for The Independent, The Telegraph, WIRED, and several smaller publications. He holds an undergraduate degree in geography from the London School of Economics, and a master's degree in journalism from Columbia University.Theron often covers Warren Buffett, Michael Burry, and other elite investors. He also writes about the world's wealthiest people and shares financial advice from all manner of rich and successful people.Email Theron at tmohamed@businessinsider.com and follow him on X @theron_mohamed. Finance AI Leadership More Oppenheimer