Nvidia Stock Falls Over 30%: Why Michael Burry Sees a ‘Heck of a Trade’

Nvidia has fallen far enough to catch the attention of one of its most persistent critics. After the shares closed more than 30% below their record intraday high on November 10, Michael Burry suggested that the market could soon see “a heck of a trade” in the AI chipmaker.

He has not abandoned his bearish outlook. Burry sees the possibility that investors have reacted too harshly to the immediate controversy surrounding CEO Jensen Huang, while remaining concerned about Nvidia’s competitive strength over the coming years.

The situation has since become more serious. Nvidia recovered some ground on November 11, then dropped again in extended trading as reports raised the possibility of Huang’s removal. That adds a new risk to the rebound argument Burry outlined a day earlier.

How far has Nvidia stock fallen from its record high?

Nvidia stock closed at $168.89 on November 10, down 30.6% from its October 6 intraday record of $243.37. Its subsequent rebound briefly reduced that decline, before another selloff outside regular market hours.

Sources: Yahoo Finance historical prices, Stock Analysis and MarketBeat. 

Nvidia gained 2.87% during regular trading on November 11, but the later after-hours price was 8.62% below that close. The rebound had not resolved the selling pressure.

Why does Michael Burry see a possible trade despite being bearish?

Burry’s argument rests on a possible gap between the damage to Nvidia’s share price and the immediate damage to its business. In his November 10 commentary, he expressed doubt that the controversy would severely hurt the company’s economics, even though he remained unwilling to treat the shares as a long-term holding.

Customers need Nvidia’s computing systems to train and run AI models. A leadership controversy does not automatically remove that need or make competing systems immediately interchangeable.

If investors sell on the assumption that a serious business setback is inevitable, evidence of continued demand could support a rebound. That does not establish that the stock has reached its lowest point.

Burry’s wording also matters: he anticipated that the wider market might find the shares attractive for a trade. The comments do not establish that he bought Nvidia shares, set a price target or changed his longer-term assessment.

Why has Nvidia stock fallen so sharply?

The decline reflects overlapping concerns about AI expansion, Nvidia’s governance and its exposure to China-related scrutiny. The entire fall from October’s peak cannot be attributed to the latest controversy.

Why was Nvidia under pressure before the Huang investigation?

Investors were already questioning how smoothly the next wave of AI infrastructure could be built. Nvidia fell 9.26% on November 5 as the semiconductor sector sold off following the US midterm elections.

The market worried that Democratic victories could bring tougher scrutiny of data-centre development. More demanding approvals or construction pauses could delay the facilities needed to put new AI chips to work.

For Nvidia, the link is the timing of customer spending. A company may still want more computing capacity, but a delayed building or electricity connection can change when it needs the equipment. Election results alone do not establish that orders have been cancelled; they increased uncertainty around the speed of expansion.

Why has Huang’s position become a business concern?

Huang acknowledged an extramarital affair in a memo to employees. On November 8, Nvidia’s board announced an independent investigation following reports that he had been targeted by a foreign intelligence effort. It said it had no reason to believe national security or company secrets had been compromised and expressed confidence in his leadership team.

On November 10, independent directors appointed outside counsel to conduct the investigation. By late November 11, reporting indicated that the board was meeting to consider Huang’s future, including possible removal. A confirmed departure had not been established in the reporting checked for this article.

The later coverage also included allegations of a separate relationship with a company executive. Reuters said it could not independently verify that report.

The financial concern is continuity. Huang has a central role in Nvidia’s technology strategy and relationships across the AI industry. A sudden leadership change could create uncertainty over decision-making and execution, even if near-term chip demand remains strong.

These later developments also change the context of Burry’s remarks. His November 10 assessment came before the subsequent reports about a possible board decision on Huang. It should not be presented as his endorsement of the situation after those reports emerged.

How could the China scrutiny affect Nvidia?

Reporting has raised questions about whether a network linked to Alice Huang, a businesswoman alleged to have Chinese intelligence links, helped Chinese companies obtain Nvidia chips. The intelligence allegations and any wrongdoing remain matters of investigation, rather than established findings.

The business risk is that scrutiny leads to tighter export enforcement, restrictions on distribution arrangements or additional oversight of overseas AI infrastructure. Those outcomes could affect Nvidia’s access to customers and the conditions under which it sells its products.

There is an important limit to the immediate revenue argument: Nvidia’s existing quarterly guidance already excludes China data-centre compute revenue. It would therefore be misleading to subtract every reported historical China shipment from that forecast. The larger uncertainty concerns future access, compliance and the reach of any new restrictions.

Sources: Reuters reporting dated November 5 and November 10-12; NVIDIA board statements dated November 8 and 10. Stocktwits, Business Insider and TipRanks. NVIDIA’s Q2 FY2027 earnings release and earnings call.

Why is Burry still concerned about Nvidia’s longer-term outlook?

Burry expects Nvidia’s competitive advantage to weaken over the next five years. His concern is that regulatory scrutiny and changes across the AI industry could reduce the strength of the position supporting today’s profits.

A company does not have to stop growing for that concern to matter. If customers gain more alternatives or become less willing to pay premium prices, Nvidia could sell more computing equipment while earning less profit on each dollar of sales.

There is also a funding question. Burry has criticised financial relationships across the AI ecosystem, including investment flows between chip suppliers and companies buying their products. The issue for investors is how much demand can sustain itself through customers’ own cash generation and financing capacity.

Nvidia’s response is that these investments expand its platform and that its computing equipment can be redeployed to other customers. However, redeploying equipment and preserving the original sales schedule are different things. Customer funding and actual deployment still deserve attention.

Has Nvidia’s business weakened as much as its share price?

The latest reported results show strong growth, rather than an operating collapse. Nvidia’s second quarter of fiscal 2027 ended on July 26, 2026.

The strongest evidence against an immediate collapse is management’s outlook. In August, Nvidia also gave a preliminary expectation of approximately 70% revenue growth in fiscal 2028. That remains a company forecast, but it shows how different management’s demand assessment is from the market’s recent anxiety.

However, Nvidia had already warned that rising memory costs would put pressure on profitability. On its August earnings call, management expected gross margins to bottom at 71%-72% in Q4 FY2027 before settling at 72%-73% in FY2028.

Gross margin measures revenue left after direct product costs. Lower margins leave less money from each sales dollar to cover other expenses and generate profit. Strong sales growth can therefore coexist with pressure on profitability.

Sources: NVIDIA’s August 26 Q2 FY2027 earnings release and call transcript; Reuters and MT Newswires earnings coverage. 

What does the selloff change about Nvidia’s valuation?

Nvidia is substantially cheaper relative to its latest reported earnings than it was at the October peak. Whether it is attractively valued depends on how durable those earnings are.

The company’s last four reported quarterly GAAP diluted earnings per share total $7.91. The price-to-earnings ratio or P/E, divides the share price by that annual earnings figure.

Sources: NVIDIA quarterly earnings releases and Q2 FY2027 financial-statement reconciliation; Yahoo Finance and Stock Analysis.

This comparison isolates the price decline: investors are paying much less for the same reported earnings. These are trailing P/E ratios, not forecasts or estimates of fair value.

There is a further complication. Reported earnings include investment gains, alongside profits from selling Nvidia’s products. In Q2 alone, Nvidia recorded approximately $7.77 billion in pre-tax gains from equity securities. Such gains can fluctuate and should not be treated as recurring chip-sales profit.. 

That makes the earnings denominator as important as the share price. A lower P/E offers less reassurance if future margins decline or investment gains do not recur. Conversely, sustained growth in operating earnings would make the lower price more meaningful.

The valuation impact of the leadership controversy works through another channel too: investors may accept a lower multiple while they have less confidence in management continuity and regulatory outcomes. Nvidia does not need to report an immediate earnings decline for that uncertainty to weigh on its valuation.

Author's take: What should investors verify before acting on Burry’s comments?

Start by writing down what would make the idea work. A short-term rebound depends on a different set of developments from a multi-year investment: the first may need easing fear, while the second needs durable customer demand and earnings. Keeping those assumptions explicit helps prevent a temporary price move from becoming the entire investment argument.

The next scheduled financial checkpoint is Nvidia’s November 17 Q3 FY2027 results. Compare the announcement with the existing revenue and margin guidance, then examine whether management changes its expectations for customer deployments, memory costs and future profitability.

Alongside those results, follow official board disclosures for a leadership decision and concrete regulatory actions for any change in selling conditions. Treat a report about a possible outcome differently from an announced decision.

Finally, reassess the earnings behind the valuation. Separate operating performance from investment gains and test whether the business can keep growing through the margin pressure management has already outlined. A rebound accompanied by stable deployment plans and credible earnings guidance would provide stronger evidence than a rebound driven only by relief over the headlines.

Use Burry’s comments to define the evidence to examine next. His reputation cannot resolve Nvidia’s leadership uncertainty or establish what its future earnings will be.