😵‍💫Burry Vs Nvidia War

PLUS: Baidu Challenges Huawei Chips | Japan Cuts Chip Budget

November 28, 2025

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Reading time: 5 minutes

🗞️In this edition

  • Michael Burry wages public campaign against Nvidia's AI dominance

  • Baidu emerges as China's AI chip challenger to Huawei

  • Japan cuts chip budget to $1.6B from $9.7B last year

  • Workflow Wednesday #47:  AI-Powered Planning

  • In other AI news –

    • Alibaba launches Quark glasses and aims at Meta and Xiaomi

    • Musk’s xAI heads toward a fifteen billion December raise

    • US patent office updates rules for AI assisted inventions

    • 4 must-try AI tools

Hey there,

Burry's betting $1B+ against Nvidia and publicly attacking their accounting. Baidu's chip unit could hit $28B valuation as China builds domestic alternatives. Japan's "cutting" budgets but actually institutionalizing semiconductor spending.

We're committed to keeping this the sharpest AI newsletter in your inbox. No fluff, no hype. Just the moves that'll matter when you look back six months from now.

Let's get into it.

What's happening:

Famed investor Michael Burry, portrayed by Christian Bale in "The Big Short," has been waging increasingly aggressive war against Nvidia.

Burry's betting against the AI boom, but also proactively trying to convince a growing number of followers that Nvidia has no clothes.

Burry held bearish put options on Nvidia and Palantir worth over $1B, betting they'd crash. Burry's allegations are specific. He says Nvidia's stock-based compensation has cost shareholders $112.5B, "reducing owner's earnings by 50%." He suggested AI companies are cooking books by slow-walking depreciation on equipment losing value fast. He's proposed customer demand is a mirage because AI customers are "funded by their dealers" in a circular financing scheme.

Nvidia felt compelled to respond. In a seven-page memo sent to Wall Street analysts last weekend, the company fired back saying Burry's math is wrong. He "incorrectly included RSU taxes" (real buyback figure is $91B, not $112.5B). Nvidia's employee compensation is "consistent with peers." And Nvidia is definitely not Enron.

Burry's response: I didn't compare Nvidia to Enron. I'm comparing Nvidia to Cisco circa late 1990s, when it overbuilt infrastructure nobody needed and stock cratered 75%.

Nvidia's stock has gone up twelvefold since early 2023. Market cap is $4.5T. Its ascent to the world's most valuable company is faster than anything the market has seen.

Why this is important:

Nvidia responding with a seven-page memo to analysts shows the company taking threat seriously despite blowout earnings. That's unusual. Market leaders typically ignore critics.

History shows credible critics with platforms can trigger self-fulfilling collapses. Jim Chanos didn't create Enron's fraud but his criticisms gave investors permission to question. David Einhorn's Lehman Brothers takedown hastened loss of confidence. Underlying problems were real, but criticism triggered a crisis.

If enough investors believe Burry about AI overbuilding, they sell. Selling validates bearish thesis. More investors sell. Burry doesn't need to be right about every detail, just persuasive enough to trigger stampede.

Our personal take on it at OpenTools:

This is legitimately dangerous for Nvidia.

Burry's wrong about lots of things. He's been predicting apocalypses since 2008, missing massive bull runs. But he was spectacularly right once about the housing crisis, and that one call gave him permanent credibility.

The stock-based compensation argument is interesting. $112.5B (or $91B after Nvidia's correction) is massive dilution. If Burry can convince investors that Nvidia's earnings are overstated because of comp expenses, that changes valuation math.

The circular financing allegation is more serious. If AI customers are buying Nvidia GPUs with money from investors who believe in AI, and those customers are overstating GPU useful lives to justify capex, that's musical chairs. Someone's left standing when music stops.

Cisco comparison is apt. Late 1990s telecom overbuilt fiber infrastructure. When demand didn't materialize fast enough, stocks cratered. Cisco fell 86% from peak. If AI demand is front-loaded and actual revenue lags infrastructure spending, Nvidia faces the same risk.

The self-fulfilling prophecy risk is real though. If Burry convinces enough people, Nvidia's overvalued, selling pressure builds. Nvidia's $4.5T market cap means even small percentage moves are hundreds of billions in value destruction.

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What's happening:

Baidu's positioning itself as challenger to Huawei in China's AI chip market through its majority-owned subsidiary Kunlunxin. Several analysts upgraded Baidu's stock outlook, citing the semiconductor business gaining domestic orders.

JPMorgan forecasts Baidu chip sales to increase six-fold to $1.1 billion by 2026. Macquarie estimates Kunlunxin could be valued at $28 billion.

This month, Baidu laid out a five-year roadmap for Kunlun AI chips, beginning with M100 in 2026 and M300 in 2027. The company uses a mix of self-developed chips in its data centers to run ERNIE AI models alongside Nvidia products.

Kunlunxin won orders from China Mobile suppliers earlier this year. Deutsche Bank said Kunlunxin "has emerged as a leading domestic AI chip developer, focusing on high-performance AI chips for large language model training and inference."

Why this is important:

Six-fold revenue growth forecast to $1.1B by 2026 is aggressive but reflects a captive market created by US export controls and Beijing's "buy local" pressure.

The $28B valuation estimate for Kunlunxin as a subsidiary shows analysts believe the chip unit could be worth more than half of Baidu's entire $50B market cap. That's a bet on chip business becoming a core value driver.

China Mobile orders validate Kunlunxin's commercial traction beyond Baidu's internal use. Hyperscaler adoption is necessary for meaningful revenue scale.

Chip shortage driven by Nvidia export bans and manufacturing constraints creates a temporary window for domestic players to gain share before competition or supply normalizes.

Our personal take on it at OpenTools:

This is a captive market opportunity, not a technical breakthrough.

Baidu's not building chips because Kunlunxin matches Nvidia on performance. They're building chips because Nvidia's blocked and Chinese companies need alternatives. That's policy-created demand, not product-driven adoption.

Six-fold revenue growth to $1.1B sounds impressive until you realize it's still small scale. For context, Nvidia's data center revenue was $51.2B last quarter alone. Baidu's 2026 target is 2% of one Nvidia quarter.

The $28B Kunlunxin valuation is speculative. Macquarie's estimate assumes sustained demand, manufacturing scale-up, and competitive performance. All three are uncertain. Valuations for unprofitable chip subsidiaries in captive markets are notoriously volatile.

China Mobile orders are meaningful validation but also reveal dependency on state-owned enterprises. If growth comes primarily from SOEs following government directives rather than private enterprises choosing the best product, that's a fragile business model.

The "full stack" positioning (chips, servers, data centers, models, applications) is a smart strategy if Baidu can execute. Vertical integration from silicon to software creates stickiness. But it also requires excellence at multiple layers, which few companies achieve.

Baidu's making a smart play in a constrained market. Whether it becomes sustainable business or policy-dependent opportunity depends on factors mostly outside their control.

What's happening:

Japan's allocating $1.6 billion in supplementary budget for AI and semiconductors, down from $9.7 billion last year. The government plans to secure most additional funding through regular budgets going forward, providing more stable funding.

Since 2021, Japan's set aside about $37 billion total for semiconductor revival strategy, funding projects including Rapidus Corp., TSMC's Kumamoto foundries, and Micron's Hiroshima factory.

Prime Minister Sanae Takaichi's cabinet signed off Friday. Parliamentary approval expected to go smoothly as the ruling coalition secured lower house majority with small caucus addition.

METI requested $650 million to invest in Nippon Export and Investment Insurance to strengthen the government-backed trade insurer's financial foundation. The insurer will implement Japan's portion of the $550 billion US-Japan trade deal investment program.

The ministry also aims to secure $608 million in supplementary budget to help private companies secure rare earths and strengthen national stockpiles, reducing reliance on China for critical minerals.

Why this is important:

$1.6B versus $9.7B looks like a massive budget cut, but shift to regular budgets means more predictable, sustained funding instead of lumpy supplementary allocations. That's better for long-term planning.

$37B total allocated since 2021 shows Japan's seriousness about semiconductor revival after decades of declining from 50% global market share in 1980s to under 10% today.

Nippon Export and Investment Insurance getting $650M to handle the US-Japan $550B investment program positions Japan as key partner in US semiconductor supply chain strategy.

$608M for rare earths stockpiling and reducing China reliance is economic security spending addressing supply chain vulnerabilities exposed by geopolitical tensions.

Our personal take on it at OpenTools:

The headline number is misleading.

$1.6B versus $9.7B looks like Japan's retreating from semiconductor ambitions. Reality is they're shifting from ad-hoc supplementary budgets to stable regular budget allocations.

$37B total since 2021 is a substantial commitment for a country with Japan's budget constraints. For context, the US CHIPS Act allocated $52B. Japan's spending 71% of the US amount despite the economy being one-quarter the size. That's a proportionally larger commitment.

But outcomes matter more than inputs. Japan's semiconductor market share collapsed from 50% in 1988 to under 10% today. Throwing $37B at Rapidus, TSMC Kumamoto, and Micron Hiroshima doesn't guarantee competitiveness returns.

This is Japan playing a long game on semiconductor revival and economic security. The $1.6B headline undersells commitment. The real story is institutionalizing funding and embedding Japan in US supply chain strategy.

This Week in Workflow Wednesday #47: AI-Powered Planning

 This week, we’re showing you how to turn messy goals into clear, data-backed strategy — without disappearing into a five-hour planning session or a 40-slide deck.

Workflow #1: Build a 90-Day Growth Plan in 10 Minutes (Perplexity)

Step 1: Drop a single query into Perplexity — “Give me the current market landscape for [your industry] with competitors, trends, risks, and opportunities.” Watch it pull live data you’d normally spend half a day hunting down.

Step 2: Paste that output back in and tell Perplexity to rank your next 90-day priorities using the ICE or RICE frame……We break down this workflow (and two more ways to use AI to plan smarter and execute faster) in this week’s Workflow Wednesday.

  1. eCold.ai - An AI powered tool for automating cold email personalization

  2. DetangleAI - An AI-based tool that simplifies complex legal documents into easy-to-understand summaries

  3. TimeToTok - An AI-powered tool that provides insights and suggestions to help TikTok creators grow their accounts

  4. AINiro - An AI chatbot platform that offers custom ChatGPT chatbots for various purposes such as customer service, e-commerce, and lead generation

We're here to help you navigate AI without the hype.

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– The OpenTools Team

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