Key Takeaways
- • Michael Burry responded on X that Citadel CEO Ken Griffin's warning that GPU rental prices could enter "freefall" if supply exceeds demand is "obvious to most with a working brain cell."
- • Nvidia's gross margin fell to 56.9% from 64.9% during its fiscal 2023 downturn, when revenue was flat at $27.0 billion, illustrating how quickly scarcity pricing can unwind; margin was 75.0% in the quarter ended July 2026.
- • CoreWeave would feel a GPU glut first, with its operating margin moving from 16.9% in 2024 to slightly negative (-0.3%) in 2025.
- • Rental prices still signal shortage, with H100 rental costs reportedly up 45% since December, while consensus expects Nvidia revenue to rise from $216 billion in fiscal 2026 to $692 billion in fiscal 2028.
Summary
Michael Burry, the investor known for betting against the U.S. housing market before 2008, endorsed Ken Griffin's warning on AI compute pricing. Responding on X on a Monday post summarizing Griffin's bear case, Burry wrote that the point was "obvious to most with a working brain cell." The exchange comes as Nvidia (NVDA) fell about 4% in the prior Thursday's AI selloff and as the largest cloud providers prepared to update their spending plans that week.
Griffin made his case on Bloomberg Talks the previous week, drawing a parallel to the telecom buildout of 2000: "We built more fiber than we had demand for, and the price of telecommunications just went straight down." He argued that if GPU provisioning exceeds demand, "marginal pricing will actually go into freefall," a development he said "really upends all the investment assumptions that people are working with today." Because the marginal cost of renting an installed GPU for another hour is low, owners in a glut would cut prices to keep chips utilized. The effect would reach Nvidia and AMD through customer orders and would hit CoreWeave (CRWV) directly, since GPU rentals are its revenue.
Nvidia has already experienced a version of this dynamic. In fiscal 2023 (the year ended January 2023), revenue was flat at $27.0 billion and gross margin fell to 56.9% from 64.9%. Gross margin has stayed above 70% since, reaching 75.0% in the quarter ended July 2026. Consensus estimates assume the shortage persists, projecting revenue rising from $216 billion in fiscal 2026 to $692 billion in the year ending January 2028 and $903 billion the following year.
Current market signals still point to tightness. Social Capital noted on X that renting an H100 costs 45% more than in December, despite the chip launching in 2022 with two newer generations since released. Chamath Palihapitiya of Social Capital attributed this to power constraints: "Power is the binding constraint." CoreWeave's exposure is the most immediate: its operating margin fell from 16.9% in 2024 to slightly negative in 2025. Blackstone President and COO Jon Gray, whose firm has provided chip financing to CoreWeave, told Bloomberg Talks that neocloud business fundamentals are "quite good" but cautioned, "you've got to deliver that compute," which requires debt, equity, data centers and power. Bloomberg host Dani Burger noted that yields on some of CoreWeave's debt have reached 15%.
The article's author concludes that a glut is not imminent given power constraints, but that CoreWeave has the least margin for error if prices turn and that Nvidia's consensus estimates leave little room for a slowdown. Investors will watch hyperscaler spending updates this week and Nvidia's earnings report on Nov. 17 for signs that the largest buyers are slowing.
Griffin made his case on Bloomberg Talks the previous week, drawing a parallel to the telecom buildout of 2000: "We built more fiber than we had demand for, and the price of telecommunications just went straight down." He argued that if GPU provisioning exceeds demand, "marginal pricing will actually go into freefall," a development he said "really upends all the investment assumptions that people are working with today." Because the marginal cost of renting an installed GPU for another hour is low, owners in a glut would cut prices to keep chips utilized. The effect would reach Nvidia and AMD through customer orders and would hit CoreWeave (CRWV) directly, since GPU rentals are its revenue.
Nvidia has already experienced a version of this dynamic. In fiscal 2023 (the year ended January 2023), revenue was flat at $27.0 billion and gross margin fell to 56.9% from 64.9%. Gross margin has stayed above 70% since, reaching 75.0% in the quarter ended July 2026. Consensus estimates assume the shortage persists, projecting revenue rising from $216 billion in fiscal 2026 to $692 billion in the year ending January 2028 and $903 billion the following year.
Current market signals still point to tightness. Social Capital noted on X that renting an H100 costs 45% more than in December, despite the chip launching in 2022 with two newer generations since released. Chamath Palihapitiya of Social Capital attributed this to power constraints: "Power is the binding constraint." CoreWeave's exposure is the most immediate: its operating margin fell from 16.9% in 2024 to slightly negative in 2025. Blackstone President and COO Jon Gray, whose firm has provided chip financing to CoreWeave, told Bloomberg Talks that neocloud business fundamentals are "quite good" but cautioned, "you've got to deliver that compute," which requires debt, equity, data centers and power. Bloomberg host Dani Burger noted that yields on some of CoreWeave's debt have reached 15%.
The article's author concludes that a glut is not imminent given power constraints, but that CoreWeave has the least margin for error if prices turn and that Nvidia's consensus estimates leave little room for a slowdown. Investors will watch hyperscaler spending updates this week and Nvidia's earnings report on Nov. 17 for signs that the largest buyers are slowing.
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