NVIDIA's Memo Response to Michael Burry's Accounting Allegations: Market Impact & Analysis

NVIDIA issued a private memo to Wall Street analysts refuting accounting allegations from Michael Burry, who criticized the company’s stock-based compensation (SBC) dilution and buyback practices [1][2]. The memo’s authenticity was confirmed by multiple Wall Street sources [1]. Market reaction was mixed: NVDA’s stock rose +2.05% on November24 (outperforming the Technology sector slightly) but declined -6.84% over5 days [3][4][6]. Financial metrics reveal a nuanced picture: NVIDIA’s net profit margin of53.01% (industry-leading) counters claims of accounting irregularities [5], while its low ROE of1.04% aligns with Burry’s criticism of SBC dilution [5]. Reddit discussions reflect divided investor sentiment: some criticized the memo’s framing (comparing to Enron as setting a low bar), others dismissed Burry as a grifter, and a minority emphasized NVIDIA’s profitability making allegations irrelevant [2].

1. The memo’s framing (Enron comparison) led to mixed sentiment: while it addressed Burry’s claims, the Enron reference sparked unnecessary controversy among investors [2].
2. NVIDIA’s high profitability mitigates some but not all of Burry’s concerns: the strong net margin suggests operational health, but the low ROE indicates SBC dilution is a valid point of scrutiny [5].
3. Competitive risks (Meta considering Google’s AI chips) add to short-term volatility, compounding the impact of Burry’s allegations [5].
4. Long-term growth prospects remain strong: NVIDIA’s3-year return of+1022% and analyst consensus buy (target $250) highlight enduring market confidence [5].

• Ongoing Criticism
  : Burry has vowed to release more details, which could trigger further short-term volatility [1].
• Competitive Threats
  : Google’s AI chip push (Meta discussions) threatens NVIDIA’s near-monopoly in AI data centers [5].
• Valuation Risk
  : The high P/E ratio of44.77x leaves little room for growth disappointment [5].

• Long-Term Growth
  : NVIDIA’s dominance in AI chips positions it for sustained expansion [5].
• Analyst Confidence
  : The consensus buy rating (73.4%) and target price of$250 offer significant upside potential [5].

• Market Performance
  : NVDA’s 1-day gain (+2.05%) vs.5-day decline (-6.84%) reflects mixed investor sentiment [3][6].
• Financial Metrics
  : P/E ratio of44.77x, net profit margin of53.01%, ROE of1.04% [5].
• Analyst Consensus
  : Buy rating with target price of$250 (+36.9% upside) [5].
• Investor Sentiment
  : Divided on memo framing, Burry’s credibility, and relevance of allegations [2].