NVDA Chip Obsolescence and AI Industry Sustainability Risks

This analysis is based on a Reddit discussion [5] and market data [0] focusing on NVDA chip obsolescence and AI industry risks. NVDA stock experienced significant volatility, with a 7.81% drop on 2025-11-20 followed by a further 1.30% drop on 2025-11-21 [0]. AI firms like Meta have extended chip depreciation cycles—Meta increased from 4.5 to 5.5 years, saving $2.9B in 2025 [2]. Michael Burry estimates these practices understate depreciation by $176B for major tech firms (2026-2028) [1].

• Extended depreciation schedules inflate earnings: Google/Microsoft now depreciate chips over 6 years (double 2020 periods) [2].
• Low ROI on AI investments: MIT’s 2025 report found 95% of generative AI investments yield no return [4].
• Unsustainable CAPEX: Bain projects an $800B annual revenue gap for AI firms by 2030 [3].

1. Overstated Earnings
   : Burry’s $176B estimate of understated depreciation could lead to future earnings revisions [1].
2. AI Bubble Burst
   : 95% ROI failure rate and unsustainable free adoption models raise correction concerns.
3. Unsustainable CAPEX
   : Yearly GPU spending replaces traditional 5-year cycles, increasing financial pressure [5].

• Chip repurposing: Older chips can be used for non-frontier workloads, reducing obsolescence risks [5].

• NVDA stock volatility reflects market concern over chip obsolescence and AI industry risks [0].
• Extended depreciation practices by AI firms mask true costs, inflating earnings [2].
• 95% of AI investments have no ROI, indicating potential bubble risks [4].
• AI firms face an $800B annual revenue gap by 2030 to fund CAPEX [3].