The Canadian Investor - Michael Burry Calls Out Nvidia and the AI Mania

Episode Date: November 27, 2025

Couche-Tard may finally be showing early signs of a long-awaited turnaround with improving U.S. trends, stronger margins, and surprising strength in food and nicotine alternatives. Home Depot delivered solid operations but once again cut guidance as the renovation cycle continues to stall. And then there’s Nvidia another monster quarter… paired with a surprisingly cold market reaction. We dig into what’s driving the pullback, the emerging threat from in-house AI chips, and why Michael Burry believes Nvidia today mirrors Cisco in 2000. Tickers of Stocks Discussed: ATD, HD, NVDA, META, ORCL, MSFT, GOOGL, AMZN, CSCO Check out our portfolio by going to Jointci.com Our Website Our New Youtube Channel! Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Web player - The Canadian Real Estate Investor Asset Allocation ETFs | BMO Global Asset Management Sign up for Fiscal.ai for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

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Just my reminder to people who own cyclicals. Don't be surprised when there's a cycle. If there's uncertainty in the markets, there's going to be some great opportunities for investors. This has to be one of the biggest quarters I've seen from this company in quite some time. Welcome back to the Canadian investor podcast. is Simon Belanger and back with Dan Kent. We are back for a news and earnings episode.

It's kind of going to be a little bit of a hybrid here, so we're going to go over the earnings of Alimentation Custard after that Home Depot, so Daniel will go over those. And then we'll do Nvidia's earnings, but it'll be a semi-deep dive with what's going on with Nvidia. There's been a lot of news happening since the earnings last week, and the stock has been up and down, so we'll go over that. I think it's going to be fun.

But before we get started for our dividend investors, because the banks are very popular amongst Canadians and, of course, people listening to this podcast, bank earnings are coming up. I think it's starting next week. So we'll be going over those next week and probably the week after as well. Yeah, it's funny at the end of last year, I ended up like cutting back on a few banks because I thought the run up was done. But they've continued to run up yet again this year.

They've had a crazy good few years. But yeah, I mean, it's not even so much Nvidia earnings as kind of Google as well, like Alphabets causing a lot of turmoil right now. And yeah, it's a pretty slow time in regards to earnings. So this whole Nvidia Michael Berry stuff should be a good segment. Yeah, you gave people a preview. I was trying to keep that further in.

Oh, you were trying to keep it a secret. Just keep in a secret. Well, maybe it makes people more interested. Yeah, exactly. And I'll explain who Michael Burry is for those who are not familiar. So let's get started with Alimentation Custard, who just reported their quarter here. Yeah, so they've had, I mean, a really rough go over the last few years. I mean, this is a very popular company for a lot of people.

I mean, it's been one of the better compounders, I guess you could say in Canada, like large cap companies over the last while. But they finally kind of reported a pretty strong quarter, their first one in a while. It's not like it was a slam dunk or anything, but earnings topped expectations by double digits. And same store of merchandise sales in the U.S. came in at 1.2. percent. Europe was 0.5 percent and Canada was 5.2 percent. When you look at the Canada number like 5.2 percent, you might think, you know, that's really good. I mean, the bulk of the business is in the United States. Like, you definitely want to see that U.S. segment doing, you know, the best. But it is,

it's quite an improvement because I think they had five straight quarters of same source sales declines in Canada. And now we're seeing five state quarters of increases. And the U.S. It's kind of turning things around as well. So it's a good sign. And, you know, it's just the second consecutive quarter of same store sales growth in the U.S. And it actually is the first quarter above 1% since July of 2023. Margins increased in the merchandise segment as well by 90 basis points on this side of things. Maybe just to get back to that for people who just to put this in context too is they saw declines, right, for a better part of 2024.

they also saw some declines back in 22. And these numbers, I don't believe they're inflation adjusted either. So the increase is better than a decline. But on a real basis, it's not like sales are increasing all that well. I would argue that the U.S. sales are still lagging inflation. So on a real basis, they're actually still, they would be declining. Yeah, they wouldn't be inflation adjusted. So, yeah, you're talking like, and I would say, you know, goods at convenience stores, I mean,

They've probably gone up more than, you know, headline inflation numbers. I mean, I don't know. I've been to a few convenience stores and some of the prices are ridiculously expensive. So that was kind of the fallout for, you know, a lot of these convenience store companies in 2022. I mean, when we had 9% inflation and a lot of people started pulling back on spending, the first thing people probably pull back is junk food at convenience stores, which kind of hit them. But definitely showing a bit of a turnaround in this regard. I mean, it's only one quarter.

but if they stringed together a few consecutive ones here, it could be a strong sign. Fuel sales declined in the U.S. They were down 0.6%. Canada increased by 1.1%. And the company's fuel margins also ticked slightly lower in the U.S. I think this is probably just an element of a slower economy in the U.S. potentially lower interest rates kind of fueling growth here in Canada while the U.S. consumer remains very stingy.

I mean, we've seen it kind of with GDP growth that, you know, the only thing that's really fueling, the U.S. economy right now is data centers. Other than that, you know, it's relatively flat. I mean, we've seen it with other operators like Home Depot, which we'll talk about next. I mean, they're, you know, kind of cutting guidance because people just are not spending money. The company continues to be very bullish on itself at these prices. They bought back over a billion dollars worth of shares, Canadian dollars worth of shares on the quarter. And they did mention on the call that they're kind of finally seeing a big rebound in food sales.

Margins are up 400 plus basis points year over year and comparable sales. are the strongest they've been in over a year. And they also kind of mentioned that they've never really had this much confidence in their trajectory at this point in time, kind of signaling that management thinks they're going to turn things around. And the company is seeing. They have never had that much confidence. I think what is in the trajectory?

In the trajectory. Okay. Not their current results. Yeah. It's not like it's that great. And I know they're trying to project confidence, but sometimes I'd rather get management to be very true. I don't know. Maybe they have data we don't have access to. It just doesn't look that great. I'll be

quite I would imagine it's not the actual numbers, but more so the trend. Yeah, the trajectory. Yes. The trajectory. So I mean, even if it could be a subpar trajectory, if the trajectory is going upwards, they, they like that. But they're seeing good growth in the U.S. on the nicotine side of things. And one of the, one of the main things that's like driving a lot of this is those tobacco free like pouches. Yeah. And like it, there's, there's, there's, They ban them in Canada, so you can't buy them at gas stations. But, I mean, if you think about it, a lot of people that go to these stores to buy, say, cigarettes, they go in there, they buy a, you know, a pack of chips, a soft drink, maybe pack

a gum or something. So it's actually like, if you can get people into the stores to buy nicotine products, it actually ends up adding additional sales over and above that. So, I mean, they've seen a decline, obviously, in smoking. It's way on the decline. Now there's kind of an increase in these tobacco, free products that a lot of people are getting back into convenience stores again. And they do mention that. But overall, it was a pretty solid quarter from the company. The market

liked it. I think it's up 10% since posting earnings. It's obviously it's been flat for the better part of probably two or three years now. But yeah, pretty good quarter. Yeah, I guess the biggest question for Kustal will be what happens on the growth front because, I mean, at some point, there's such a big player. How do they grow their store count? Because that was always a story about Kustal was just growth in store counts with joint TCI subscribers can see here how it's grown over the years and it's even more noticeable when you start looking here on an annual basis about 10 years ago it was in the 12,000 range and now it's around 17,000. But there is a good question to be had. Where is the growth going to come from? Yeah. And I mean, they were obviously

chasing Seven and I quite aggressively, which is probably, you know, maybe they had the same mentality. I mean, I think that area of the market is still very, very fragmented. I think they could still pick up quite a bit of stations. Yeah, I'm not sure how. At the same time, it's not needle moving as much, right? As you get bigger. No, as you get bigger. Yeah, exactly. There's not, there's less growth coming from that. But that's a good question. Obviously, I wanted to mention that, not that I have any strong opinions one way or another for any Montesson-Custard. Obviously, it's a Quebec-based company, so I do have a lot of respect for them. My roots being Quebec, but just some questions to ask, you own the stock. I know it's very popular, but there are some real questions and challenges

with the company. And I think it's always healthy to be asking that whether you own it or whether you want to start a position. But let's move on to Home Depot another retailer. And I guess the housing market is not looking great in the US, right? No. No. Like Home Depot is a company that I've owned for, I think I bought it in like 2022 maybe. And I mean, my idea here was eventually, you know, rates would decline and people would kind of start renovating. more probably spending more on home improvement and like they they were kind of in the same boat like they were generally pretty upbeat on the environment kind of turning around here but this quarter I mean they pretty much admitted that they were probably wrong and now they're definitely

delaying things it was a good quarter from an operational standpoint like from what you can expect I mean obviously the results haven't been good for quite a few years now they've they've been in line with what is expected but guidance is kind of where things got I don't want to say bad but they kind of just warned, you know, it's not going to get any better anytime soon. So sales increased 2.8%. Same store sales in the U.S. remained effectively flat. So they increased 0.1%. Earnings came in slightly lower than last year, but that's been expected.

Average ticket, which is, you know, the average of what people are spending when they go into the stores. That increased by 1.8%. So, again, we're talking below inflation, but was offset by a decline in overall transactions of 1.6%. were effectively, you know, lower than average, you know, increases in prices of what people are spending combined with people are just spending less period, going in less period. It kind of looks like the, you know, the rebound in renovations is being delayed for sure. I know Home Depot had commented a few times. They expected, well, analysts had expected like something like $50 billion in pent up home

improvement, like demand that was there. And obviously Home Depot and like a Home Depot and like a Home Depot and a. lows. They have a massive market share in the United States. So you would expect them to see a pretty big chunk of that. And now they kind of just, you know, they downgraded the outlook again. And they kind of mentioned that the environment is getting tougher for much longer than they anticipated. So full year sales are expected to go 3%. And mostly that is due to acquisitions. So same store sales will be slightly positive, which was downgraded from greater than 1% previously operating margins around 13 percent earnings will decline by 5 percent and again the company

kind of mentioned that housing turnover remains very low i don't know exactly why this would be i mean people aren't moving i would imagine there's an element of maybe pandemic mortgage rates having an impact there but there's got to be something else no i mean it's all the 30 year mortgages right in the u.s um so for Canadians are not familiar in the u.s 30 year mortgage terms are very common so here you'll have amortization, I guess 25 is the most common, but you have your mortgage that comes up typically every five years, but you could get like a three, four, two, one year term. It really depends on what you locked in when you renegotiated your rate. But in the U.S., that two, three, four, five year term is actually over 30 years. So a lot of people refinance back during the pandemic at three percent. I don't know if it was lower than that, but let's say. It was lower, yeah. Yeah, lower than that. Sometimes you could get two and a half. Exactly. So a lot of people refinance at that and those mortgages for the most part are not portable. So if people are looking to upsize, they have to sell the home and then buy a new home at still pretty elevated prices, but now they're looking at I think it's around 6.5% in the US for 30 years now for the mortgages. So you're looking at substantially higher costs for getting a bigger home that will be probably more expensive to begin with on a dollar basis and then you add the fact that you're paying. more on the monthly payment because of that higher interest rate. So it's a double whammy.

So what you're seeing in the U.S., and I've listened and read a lot of housing analysts from the U.S. is just there's not a lot of turnover. Some people who can sell, like baby boomers, are being selective. So they're holding firm on their price. But then you have people that maybe they're getting divorced, maybe they're moving to another city, things like that where you have four sellers that now they're starting to see prices come down a bit more because of that. So it's not looking good. A lot of analysts are saying that it could be a rough couple years, if not more for U.S. home prices. And you get into the

situation for Home Depot where people may want to renovate instead, but high inflation, higher insurance costs, higher property taxes, all these things happen and probably limit the amount of money that existing homeowners can actually put in their properties, which would affect a retailer like Home Depot. Oh, yeah, massively. I mean, that was kind of my idea for owning this is you have a lot of those pandemic mortgages. I mean, if you have a two and a half percent, 30 year mortgage right now, you're doing

absolutely everything you can to keep that mortgage because I think I looked it up quickly on Y charts here. It's 6.3% for a 30 year mortgage in the States. I mean, you're talking about more than double. So I kind of thought that would drive more people to renovate rather than move. But it seems like right now a lot of people who do that stuff kind of tap into home equity as well. So interest rates have a big play in that too. And I think it's just too expensive right now.

So you need kind of lower declines. And I think there's, you know, talks of maybe rates not even coming down in the next meeting. So you definitely need lower interest rates to encourage people to, you know, start spending money again? Yeah. Yeah, well, the 30 year is affected by the 10 year. That's my understanding in the U.S. So even if they lower rates for the Fed, it's no guarantee it'll actually. I guess you need yields to come down. Yeah, you need yields to come down. So that is definitely one impact. And tapping into your home equity becomes a problem if you start seeing declines and home prices because then you don't have enough home equity to tap in. It's great when prices are going up because

then you're building equity. And apparently it's more the exception to the rule. that people put 20% or more in the U.S. So you have a lot of recent home buyers that have been putting much smaller down payments. So combine that with a lot of areas, again, from what I've read in the U.S. that are seeing decline in home prices, you have little to no equity to tap into. So I think it's just this multitude of factors

that are not working in Home Depot's favor, at least for the U.S. housing market. Yeah. Yeah. I mean, on the rate environment, I mostly meant on the heat lock, because they should be prime minus whatever. I'm not sure I would have certain extent. Yeah, I don't know how it works down there.

But yeah, I mean, they like Home Depot pretty much came out and said like there's no near term catalyst to turn this around. So they said demand remains sluggish and housing uncertainty will persist. The only thing is is when the environment does turn around, it's kind of hard to imagine companies like Home Depot when lows won't benefit quite a bit. It's just like now, I mean, I guess if you bought this for the same reason that I bought it, it's, it's kind of, it's not that the thesis is broken. It's just definitely delayed. And yeah, this was, they've generally been relatively upbeat, but this was the one quarter where they kind of, you know, flipped a switch and just said, like, it's, it's going to be

bad for longer. Yeah. No, I mean, at the end of the day, like, I think it's a great company. And it's a kind of company that if it, if the housing market takes a turn for the worse, it could become a really attractive play. Again, these are the kind of companies that should do well long term. As long as you're able to kind of stomach the near term, especially if there is really bad macro around housing in the U.S.

and the economy is slowing down, X. AI spending, X.A.I. spending. It could be a good opportunity. I know people sometimes would be a counterintuitive because their profits will likely fall. But again, if you're viewing this as a long-term investor, If you buy it when things are rough, it's a solid company. It should be fine long term. Sure, it may lag a little bit short term, but in long term, you could end up seeing some pretty good returns. Yeah.

And that's kind of my idea. I'm just continuing to hold it. But yeah, they need some sort of turn around in the economy down there because, I mean, consumers just aren't spending money. We're seeing it with a lot of, you know, a lot of different types of companies. You look at the fast food chains that are all getting, like a lot of them are getting wrecked down there. Chipotle, Wendy's. Even McDonald's is struggling, I think, a bit. Like Starbucks, like people just aren't spending money right now.

So home renovations are far down the list. Well, maybe they'll send a tariff stimulus checks. I don't know. That's something they've been talking about. Pariff dividends. Sorry, dividends, yeah. Not stimmys. Because there's not other things that could be spent on like the dead in the US.

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Considering ETFs like ZEQT, BMO's all equity ETF, or ZEDGRO, BMO's growth ETF. Earlier this year, I headed to Calgary for our Stampede podcast meetup. It was a blast. I got to connect with listeners, hear a few of their stock pitches, catch them rodeo events for the first time, enjoy the fair, and just soak up the energy of the city during the Stampede, all while rocking my new cowboy hat. While I was there, I stayed in a home on Airbnb just a short walk from the Stampede grounds. After a full day making new connections with people just as passionate about investing

as I am, and a late night at the rodeo, it was the perfect place to come back to and make a quick dinner and unwind in a quiet, comfortable space that felt like home. That trip got me thinking about my own place back in Ottawa. While I'm away, my home usually just sits empty, but instead, I thought I could be hosting it on Airbnb. Hosting is flexible so I can set the timing, and it could help me cover the cost of my next adventure while someone else enjoys our beautiful neighborhood. Your home might be worth more than you think. Find out how much at Airbnb.ca slash host. Let's switch to NVIDIA over here. On the surface, I mean, let's be honest, it was a great quarter by NVIDia. Yeah. I don't know what else to say in here, like I'm

showing for Joint TCI subscribers. This is the growth rate of their revenues year over year. And keep in mind that their revenues hit $57 billion, and that was a 62% increase year over year and 22% quarter over quarter, which is just absolutely amazing. And data center revenue, and let's just be honest, this is almost a data center company at this point, which it used to be a gaming company for its GPUs. I remember I used to be a gamer, Nvidia, and I think radion, which was later bought by AMD, were always the two out. there I think the original one and I think they were bought by

Nvidia was like voodoo. Do you remember that one Dan? I do not remember voodoo. Okay. So that was like late 1990s I think but that's beside the point data of center revenues is 90% of revenues now and that was up 66% year over year. AI infrastructure demand just continues to be

extremely strong gross margins and that's super impressive. You're looking here at gross margins of 73.4% and operating margin of 63.2%. And this is just amazing. And they've been towards the highest, these margins in pretty much Nvidia history. Not quite the highest, but they're definitely been in the mid-70s, low to mid-70s for some point when it came to gross margins.

And operating margins, I think it's the second highest quarter in Nvidia's history. It's really impressive how, like, I don't know what else to say, how impressive these results are from on margin. Yeah, it was, and I mean, a lot of people, I think the markets were pretty rocky at that point when they reported. And I think if they would have reported a bad quarter, I think it would have been ugly. It was a very good quarter from Nvidia. And I think it, yeah, it spiked on the day, but then it ended up tanking, like it actually finished in the red. Yeah, I think it was like five, six percent up after hour. when they reported and then yeah the following day it started up i think you're right and then

it just finished in the red and ePS earnings per share came in at one dollar 30 that was up 67% you over year they also talked about major partnership for example open a i deploying 10 gigawatts of nvita system and just to give you a scale of gigawatts and how much power that is that would be enough to power New York City. Yeah. Like that's how much power this is eating. And I'll touch a little bit about that later as to maybe why we are seeing some gyration in that AI space right now.

And I think the power consumption may have something to do with it. Oracle, they're building the Department of Energy supercomputer that will feature 100,000 Nvidia Blackwell GPU. So the Blackwell GPU is their most advanced one, the most recent one. And the other segments that are pretty much irrelevant now for the business, but gaming revenue was just a measly $4.3 billion for the quarter and actually perform well up 30% over a year, but slightly down quarter over quarter. Auto and robotics, that was up 32%.

But it's only a bit more than half a billion a year. So not really meaningful. In terms of forecast or Q4 revenue forecasts, 65 billion. billion plus or minus 2% they said there. That would mean a 14% increase versus this quarter and a 65% increase year over year. And these are already massive numbers. And margins, gross margins are expected to be around 75%. So I don't know what to say, but this was a really good quarter. They blew expectation. I mean, they reported last week on November 19, after the market close like we were talking about. The results were better than analysts at a

expected and the stock was up 5 to 6% after hours and early on in the 20th. But since then, it's been like a pretty roller coaster ride up and down. I think now it's probably down about 4 or 5% since the pre-earnings release. So it's taking back some of that gains that it had. And it's really interesting since these, like, these results are really, really good. And I think there's definitely there's a lot of reasons why the stock has been volatile over the past week and that's what we'll kind of discuss here because people listening to podcasts may be like how the hell is Nvidia down after blowing past expectations?

Well, first, the macro backdrop. We talked about it last week during the news and earnings but there could be some liquidity pressure in the markets and less appetite for risk on. Although they beat expectation, I read that some analysts and Trader were actually expecting, maybe not publicly saying it, but expecting better results even, maybe even hitting 60 billion in revenue versus the 57 that they reported. And there's also been reports.

I don't know if you saw that, that Blackwell chips, their most advanced chips, are overeating when they're stacked together in large amounts in servers. Yeah, so that's been. And when, so I was doing some research and I saw that. that and apparently it's been an issue where there's some heating problem and apparently in video is trying to kind of dismiss these issues but also working on this if people search you'll see blackwell overheating if you see that you'll see a bunch of articles on it so that could be one of the issues leading to that but the other thing here is that happened yesterday so we're reporting this on

recording this on November 26 is that there was an article came out yesterday that META is actually considering purchasing Google tensor processing units they're called TPUs and Google has

typically kept its usage in-house for these TPUs but the report now suggests that META was a big purchaser for AI chips is now in discussion to spend billions on those TPUs. The goal would be for META to deploy those TPUs in its own data centers starting 2027. This is really key because these TPUs are specifically designed for AI usage and the advantage

here is that they are more energy efficient since they are intended to be used for AI only. The downside is it requires more software optimization, however a company like META would have the engineers to do that. The real issue here is that big tech looking to build their own. AI chip was always a bare case for the company and this shift from Google from using its own ships

to now selling it to others is really something to keep an eye on for Nvidia and you shared with me something pretty interesting yesterday from Nvidia's newsroom so on Twitter Yeah it was really weird because clearly

they were aware of the news that came out it was on CNBC so it read like this, we're delighted by Google's success. They've made great advances in AI and we continue to supply Google. By the way a lot of this dashes

in this AI, which definitely AI That's what I'm the, yeah. Nvidia is a generation ahead of the industry. It's the only platform that runs every AI model and does it everywhere computing is done. Nvidia offers

great performance, versatility, fungibility. Then ASIC. These are single-purpose chips, so like the TPUs. I don't remember the exact acronym, but I know that's what it means, which are designed for specific AI frameworks or functions. Well, the problem is right now, if your trade-off is, sure, they're less versatile, but they're more energy efficient. And what we're seeing is there is more and more energy constraints. That's what I've started to read a whole lot is you're starting to see data centers that are like not going online because they don't have enough power to supply them. And at some point, there's just not

enough power that is online in the US to power those data center. It's going to take some time to catch up. And one way to minimize that impact would have to be, would be to have more energy efficient chips. So clearly, Nvidia is very aware of that. And I find it funny. that they posted that tweet because if you're so confident in your chips like you don't even need to address this yeah I don't know the tweet was weird

it just seems weird for me for them to come out and and post that because it kind of it kind of shows that you are worried about it if you're making if you have to issue like a public statement that you're not worried about it you're probably worried about it but I mean like it's it's definitely a problem for Nvidia I mean

that right now there's probably a lot of monopoly pricing in here right now. And as soon as it goes from, you know, a monopoly just to kind of a competitor in the industry. Well, the margins, right? Yeah. Yeah, the margins are the huge thing because there's no alternative. So obviously they can kind of charge what they want. But obviously, when you introduce more competition,

you got to undercut pricing wise. And apparently Google's TPUs are much cheaper. They're not as powerful, but they're much cheaper. So, like, you know, if, if they're 80%, as efficient, but 50% cheaper, like, do you, do you go that route, you know, even though they're not top quality, do they get the job done for cheaper? Yeah, exactly. And it's not the same example, but look at Apple.

It used to use Intel. Yeah. CPUs, but now it uses its own M1 chips, like its own in-house design chips, and their laptops are actually like way better for a whole bunch of different things. One of the things are not as good as gaming, but most people who get Apple laptops, their intent is not to have a gaming PC. It's to have like a really good, especially the MacBook Pro like kind of workhorse computer that can do your like everyday tasks very well, video editing, audio editing, you name it, it'll be able to do it well. So that's kind of the

threat that could be happened because that was a big blow to Intel when Apple decided to no longer use Intel chips. And one of the things that the Apple chips are really good at is they're much cooler than their intel chips. Yeah, it's, I mean, this is definitely an issue. There's a lot of people who are just kind of casting this aside. I mean, I don't really know enough about the space to kind of comment all that much. Like, I don't have a ton of confidence, but like it seems like an issue for me. I mean, the hypers, I think there are a ton of Nvidia's data center revenue.

So if Alphabet can even capture a tiny chunk of this. Yeah, like it's, it's definitely, it's material. I mean, I'm not an expert. I would imagine that the vast majority of retail investors are not experts either. So they're probably looking at this at the same way that I am, is that it definitely could potentially be an issue. Yeah, exactly. Want to buy a stock, but don't want to shell out hundreds or even thousands for a single share? With Questrade's new fractional shares, you can invest any dollar amount and build a diversified portfolio instantly.

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Earlier this year, I headed to Calgary for our Stampede podcast meetup. It was a blast. I got to connect with listeners, hear a few of their stock pitches, catch them rodeo events for the first time, enjoy the fair, and just soak up. the energy of the city during the Stampede, all while rocking my new cowboy hat. While I was there, I stayed in a home on Airbnb just a short walk from the Stampede grounds. After a full day making new connections with people just as passionate about investing as I am, and a late night at the rodeo, it was the perfect place to come back to and make a quick dinner and unwind in a quiet, comfortable space that felt like home. That trip got me thinking about my own place back in

Ottawa. While I'm away, my home usually just sits empty, but instead, I thought I could be hosting it on Airbnb. Hosting is flexible so I can set the timing, and it could help me cover the cost of my next adventure while someone else enjoys our beautiful neighborhood. Your home might be worth more than you think. Find out how much at Airbnb.ca. slash host. Now let's move on to Michael Burry. I say against what he's been saying against Nvidia, but it's more like the AI bubble that he's saying we're in right now that has a whole lot of similarities from the 1990s that popped in the 2001-2000. For those who are not familiar, Michael Burry was the fund manager of Sion Capital. He famously made millions for his investor by shorting the U.S. housing market before the GFC

using something called credit default swaps, which was a new thing back then. if you haven't seen yet I would urge you to as soon as you're done with this podcast go and look up the movie the big short it's one of my favorite movies I swear I definitely watch it a couple times a year Michael Burry is played by Christian Bell and it's probably in my view it's the best investing movie that was ever I think so yeah yeah but that's my view I know there's some other good ones now brewery has definitely his sights on the AI space and and video as well as a bit of the big part of that. On Twitter, he's under the handle at Michael J. Burry. I think his name now is like Cassandra Unchained. I'm quite sure where that came from. But he recently closed his hedge fund. I said that having a registered fund muzzled him and he wasn't able to really speak his mind. Now that he's no longer registered with the SEC in the U.S., he can actually trade his own money and doesn't have the additional stress of managing other people's money, which I can understand to some extent, right? Like we saw it depicted in the movie where he was essentially at times he like

had a strong conviction into this. But when your fund is losing money and the markets are ripping, it becomes very hard to stay by that conviction when you have investors that are kind of clamoring at you. But you also may be in the back of your mind think maybe you're wrong. Maybe there's a small percentage chance that you're wrong. But if it's your own money, it's much easier to keep going. He also started a substack, which is not cheap, by the way. So it's 60 bucks Canadian a month, but I subscribe so I could read his first piece. It's a multi-part thing.

So I'll keep reading it. If there's some good stuff that come out of it, I'll definitely mention it on the podcast. Now, to be fair, Michael Burry, and that's something you mentioned, and it's 100% true. He became famous because of the great financial crisis, but his track record since has been mixed to say the least. He's made some bad calls. He's made some good calls, but the timing was bad, which is the same as making a bad call. He's made some good ones as well. So just take that with a grain of salt. Of course, he's got notoriety because of that, but something to keep in mind that despite being right on that massive call, it's not like he's always right.

Michael Burry is arguing that the current market is repeating the exact dynamic of the late 1990s. Massive overinvestment in infrastructure. Chips and Data Center today's versus the fiber optics routers then. Back then it was like this fiber that was laid ground and essentially 5% of it was being used. Over the years it became very useful, but they overspent and a lot of company ended up being very poor investments because of that. And it was done by highly profitable company, which will inevitably lead to a crash when supply vastly outstribs demand. Now, he goes into the article. First of all, he says, and I'll want your thoughts on this.

So he's busting the dot-com myth because, and I think I've been guilty a little bit of that too. So he points out that the 1990s NASDAQ rally was actually driven not by unprofitable businesses that, were just like pets.com or that were just had dot com in their name but it was actually highly profitable giants like the four horsemen of the era which was Microsoft Intel Dell and Cisco which are still companies to this day so it just goes to show that yes these massive companies are still pretty large companies today some I would say for the most part not as meaningful but Microsoft being the exception here and he says that The narrative to dismiss the 1990s bubble because it was all unprofitable businesses driving

the boom is just not correct because back then it was also these companies were leading the indices higher because it was still market cap weighted and that makes a whole lot of sense. It's not super easy to validate the data but from what I could find it does have a very solid point here is that a lot of the excess was actually driven and those returns were driven by these big profitable companies, but that were, like a better word, just being overvaluated. Yeah, I think, isn't it if you bought Cisco at the peak, then like you're just breaking even, I think? Maybe the, yeah, I mean, I wouldn't be surprised. Microsoft took like 15 years, right? Yeah, 15, 16 years. And that was probably the best performing one. Yeah. I mean, he's definitely

right in this regard. The only thing I'd say is I kind of looked up. most like the valuations of most of these companies back then and most of them were like 80 90 100 X earnings whereas like right now you have a lot of the mag 7 the average mag 7 like trailing price to earnings ratio is around 35x so I mean yeah it's the same but you know on at least on an earnings basis the the companies are valued at a fraction like one third price the only thing is that yeah there's there's a question also like that the quality of earnings is a valid question

yeah and especially like yeah if you get you know if you move forward and you know a lot of these investments end up dragging on depreciation I mean you take a lot of hits to earnings per share and there's a lot of questions as to whether or not these companies actually are trading at you know 35x

trailing earnings and whether they will moving forward because of all these you know the life line the life cycle of a lot of these investments they're making I guess but companies are were a lot more expensive back then than now. Yeah, definitely on the surface, I agree with you. And for those not familiar, quality of earnings when we say that, it's typically because earnings

will be, it's just their accounting principles, right? So it's not necessarily the money that's coming in and out of a business. And there's things that you can do that are perfectly legal that can make those earnings look better than they actually are. We talked about that would go easy for different reasons. But what we're referring and he does touch on that as well is company may be depreciating these chips, these GPUs from invidia over longer periods of time, whereas they should be doing it faster. And by extending that depreciation, it actually makes your earnings look better because you're not right, like lack of better worth riding off as big of an amount each year.

But what that implies if they're not doing it properly, it just means that the capital expenditures will probably increase in the future because they're going to have to replace them sooner. So that's why there's a quality of earnings there. Like, did I explain that properly that? Yep. Yeah, I mean, you're buying like when you buy these chips, obviously it's a cash outlay right away and then you kind of estimate it'd be the same thing as if you ran a small business and you had to buy a piece of equipment that lasted you 10 years.

You lay out the cash for it today and then it kind of comes off your income statement over that course of 10 years until the assets no longer. Use for. Exactly. So I mean, if you take these chips and depreciate them over, let's just say a 10 year timeline, but they're really only good for five years, that's a big issue because you're laying out more capital in five years while you're, you know, depreciating these assets out over double the time and they're really not that useful for that long.

No. It makes your, in the short term, makes your earnings look better. That's what it means. Yes, it does. Absolutely. It does. Yeah. Yeah.

And so they talked about supply site gluttony. So what it means is investor rewards companies for announcing massive spending plans. And this creates a feedback loop where companies spend wildly to boost their stock price. In the 1990s, he said telecom spent billions laying fiber optics cable like I just mentioned. And by 2002, less than 5% of that fiber was actually being used or lit. And it was a catastrophe of oversupply. And what this means is that there is tons of supply, but the demand isn't going to be. be able to match it. Now, the pushback here is there seem to be quite a bit of demand for

AI right now. And today he's saying that the five horsemen versus the four back then would be Microsoft, Google, meta, Amazon, and Oracle and startups like Open AI, which are promising nearly $3 trillion in AI infrastructure spending. Burry argues that this parallels the 1990s. Now, the market top signal, Burry shares a chart, which, I mean, it is pretty scary on say that, whether it's true or not, basically, he shows market peaks in terms of the spending boom. So he kind of shows that when the spending gets to such a high level versus GDP. And in the midpoint of that, it's usually around the time that the market peaks. And looking at right now, you can make an argument that we're approaching the midpoint. So that is another argument he's

providing. He's saying Nvidia is the new Cisco. Bury explicitly compares Nvidia to Cisco, he just says as Cisco was the Picks and Shovel winner of the internet buildout with those routers, NVIDIA is the singular architecture for AI. He also implies that NVIDIA customers are increasing the useful live depreciation of those chips like we just mentioned. And he mentioned that if NVIDIA, CEO, Jensen Wang, is currently saying exactly what Cisco executive said in 2000, essentially demand is infinite. we are at the center of revolution and there is no slowdown inside which was and he provides

some quotes which yeah it's very similar to like what was happening back in the day and those were quotes by Cisco Nortel which was headquartered in Ottawa and of course we know what some of these companies have ended up today and he also takes a shot at Sam Altman the OpenAICO he notes that Open AI has committed $1.4 trillion in spending, despite having a fraction of that in revenue and being highly profitable, which, of course, that's been a big criticism of Open AI. And I think we talked last week how Open AI was like even testing out the waters, it felt like, to see if the US government would bail it out if I needed money. And the US kind of shut that down. But what's even more funny and head scratcher and it actually came out so he posted it Michael Burry on his

Twitter so I'll just share the tweet here so there was an internal email sent to cell site analysts for Nvidia that essentially was responding to a lot of the things that Michael Burry is saying in his substack which is really weird for First of all, I mean, I've been very critical of this, so I will be critical of it when it comes to Nvidia as well. For GoEasy, the fact that they did a sell-side analyst call only and that now Nvidia is sending emails to sell-side analyst to respond to that, I think this, there's nothing that annoys me more than this. Like, that pisses me off because you're literally the largest company in the world. You have, like, probably, like, hundreds of millions of people that are shareholders in your business via ETFs or actually holding the business. And you do this kind of bullshit.

Like, I'm sorry, but I don't, like, you know me well enough, Dan, that I hate when companies do that because I find it's disingenuous. and it feels like they're trying to control the narrative through sell-side analysts. And especially when you have a company that's why I was widely held here, I think it's just a disrespect to your shareholders in general. Yeah. I mean, if you can imagine like go easy, a small-cap company does it to sell-side analysts, probably because it wants to dodge a lot of softball. You know, it wants to get a lot of softball questions. You can imagine what a company like NVIDIA would do. I mean, there's a lot of these analysts that work for institutions.

that probably make a lot of money off working with NVIDIA, so they're not necessarily going to be bearish. I mean, again, we did that episode where we kind of highlighted, like, how bad that side of the industry is. But, yeah, I mean, it's just weird. It's just weird that NVIDIA would post that tweet, and then they sell, they, like, send this post out, and I'll kind of go over on a few things that they push back Bury on.

And I don't know, it's just really weird. And it's, to me, like, we were talking. I'm like, you know what? Like last week, I'm like, and Vidi is looking like pretty good here potentially as a, you know, to start a position because the stock didn't really pop after earnings. And, you know, even if you can see continuing the growth in the next year or two in terms of the earnings that you're, in terms of the price that you're paying versus earnings, the price or earning growth ratio,

it's around one. I'm like starting to be good. But then all this stuff started to come out. And just a reaction to it really, really turned me off. And I'm more interested in a company like Taiwan Semiconductor. We can go over why in another episode. But I don't know. Do you want to chime in here before I just kind of finish NVIDIA's response?

No, go ahead. I mean, I guess the one thing I'll say is the commentary. I go back to the commentary where, you know, Nvidia is talking like that. I mean, it's the same thing with AMD. Like she pretty much came out and said that she isn't concerned that AI is a bubble. And like people who think it's a bubble are being too short-sighted. I mean, like these. are what else are they going to say, right? Yeah, exactly. Like, these are CEOs of publicly traded

companies. I mean, first off, like, they own a lot of shares. They would, they're in the interest of getting the price to go up. And I mean, obviously, it would not be in their best interest to kind of shed light on a potential AI bubble when they're pretty much at the front end of that, if it were to occur. So, yeah, I mean, take what these CEOs say with a massive, massive grain of salt. Yeah, exactly. So according again to CNBC, I wrote this yesterday, so I guess with what Michael Burry posted, I think it's pretty much a given that, yes, we can confirm that it was sent to cell site analysts. The address claims a post that Burry did on X. I showed that a bit earlier.

Essentially, the pose that they're talking about, and I'll actually bring that up here for a joint TCI subscribers, or now I'm having a little bit of issue, but that's fine. The address claims a pose that Barry did on X. Essentially, the post said that NVIDIA did about $20 billion in stock-based compensation over the years, but spent $112 billion to buy back shares while its share price actually rose and share count actually rose over that time period. So what essentially Burry is saying is like, you're paying stock-based compensation because it's cheaper than paying your employees right now, but you're buying back share to try and keep the share. at the same level, but your share count actually rose. You spent $112 billion in share buybacks, so that stock-based compensation ended up costing

you way, way more, which, now, kind of two signs to this. This is actually a pretty common practice in the tech space, and I'm not saying it's right, but it's quite common. I was listening to the All-in podcast a while back, and even they were criticizing, like, at some point this kind of stuff just needs to stop, but it's not specific to NVIDIA. But it's funny that Nvidia, their point was that they actually did $91 billion worth of buybacks, which whichever number is true doesn't really matter. The point is that he's saying that they're not doing a good job at buying back when they're trying to essentially buy back shares to offset the stock base compensation, which is kind of funny that they're pushing back on the number when they're not really pushing back on his premise. Yeah, I mean, both numbers are bad, really.

Yeah, exactly. Anyway, so I just found that funny. That was kind of the argument. They also addressed the depreciation issue saying that GPU's release in 2020 continued to run at a high utilization rate well beyond the two, three year that critics say, and I think Burry has also said that. And that's likely true, but with some caveat, so I did some research. So these older chips can still be used for AI uses, but not the most advanced.

advanced ones. So if you're looking to train models, you're the most recent models, you're trying to train them, create some better models, you need the most advanced chips. So they're not going to be used to that. But they can be used for, you know, some LLM usage. But the issue with them is that even if they can still be used, and by the way, some will not work well after two to three years. I'm not going to break news to anyone. I'm sure most people that are at least 35, 40 have probably seen a device, a computer device after a couple of years that just stopped working or didn't work well or broke. So those who still work well, they won't generate the same amount of revenue as a new or chip. So yes, they may still have some uses beyond the two,

three years, maybe year three, four, five, six, who knows, but the amount of revenue that they can generate actually declines quite rapidly. So it's probably more of a middle crown, there's also a last argument to be made here against Nvidia is that as chips become more and more powerful and they keep saying that, you know, the newer versions is X amount of time more powerful than the previous version. Does it create, does it lower the revenue that you can get even more so to these older chips? So maybe, you know, a few years down the line, chips that are two years old. Now they can only generate like 20% of the revenue. So it could accelerate the depreciation if the advancement is as rapid as it's been, if not faster. Yeah, like who wants to utilize

a three year old chip if the new chips are like way, way, way more powerful. So yeah, I mean, it's very difficult because, you know, you have a very little time to actually buy these and like turn a profit from them. So, I mean, eventually, if, if you can't, you end up with a slow down and spending. But I mean, yeah, it's, I don't even know what timeline like these, these tech companies are kind of depreciating these chips out at, but there's a, there's a lot of talk about how it's, it's not, it's too long. Like they're, they're kind of losing their, their power before, you know, they're fully

depreciated. Yeah. And especially if the newer chips are so much more powerful, I mean, if you are a client of these businesses that, you know, sell the compute at a specific price, they'll say like, okay, we'll, we'll buy the compute from the two, three-year-old chips. But again, we might pay you 10 cents or 20 cents on the dollar versus what you're charging for the newer ones, because it's just, yeah, it might work well, fine for these usage, but it's not as good enough for performing these tasks. So we will pay you some money. But there's just so many questions. And I

think the last thing about depreciation, and I think, I think Jensen Wang actually came out and tried to address that, is that you have these companies that are spending billions and billions of dollars. I think, Burry said, I think probably 600 billion in 2026 for the hypers. If you include open AI, like the big spenders there in terms of mostly AI infrastructure. So you're seeing these companies spend that much. But if the ROI starts not being that good, at what point do shareholders start being okay? Like your profits, it was fine when your profits kept going up, but now your profits are actually slowing or they're growing not as fast as they used to. So there's deceleration here. Or even worse, your profits are declining because you're spending so

much money on these chips and they're actually not returning the kind of investments that you thought they would be returning. So there could be some shareholder pressure. And if that's the case, then company could have to scale back the purchases from Individia. And I think that's what Nvidia is a bit scared about. And that's why they've put show so hard against not only that, but also the TPU from Google is just to try and show that the demand for their GPU specifically will stay sky high.

Yeah. And I mean, I think that is kind of the theory here for the bubble. obviously we don't know like I think I don't think really anybody knows because you know we don't know the tech how useful it'll be how profitable it will be down the line but I think the case for the fact that there is a bubble is kind of this I mean you get it to the point where these companies are not putting out the profits from all this apex earnings start to maybe slow down a bit or decline then you get lower future estimated earnings which will you know cause valuations to to come down and then you know you get lower sentiment which will cause valuations to come down and

i mean if this was the case i mean like you could argue that it's kind of a lookout below like it would it would not be good for some of these companies who are trading at 40x expected earnings if there's no when the earnings are coming down that's what i mean you could very quickly get these companies trading at like 25x with declining earnings and that like That's a big hit to share price, which I mean, it's not a zero percent chance possibility. Like people who are just casting this aside and saying it's a non-issue. Like, I'm not saying it's a guaranteed issue, but it's not a zero percent chance. It's not.

Yeah, I think, and that's what I tried to do is a bit more of a nuanced take here. But I'll say, like the way Nvidia has reacted in the past week is definitely, for me, it just kind of raises a few things. Like, it's not, that's not how a company that's confident in its trajectory, like Kustah. Yeah, exactly. Exactly. No, that's not a company that's confident in its trajectory going forward. Like, that's not the kind of reaction I would expect. Maybe I'm wrong.

Maybe that's just how they react and, you know, they're going to be no issue. But to me, that's just the one thing that I'm like, okay, this is definitely odd. But I think this is a good point to finish it on before we. We go on and on. Hopefully you like this episode was kind of a mix of earnings and a bit more of a deep dive. I'll keep the listener posted. You don't need to subscribe and pay $60 a month for Cassandra Unchained. I'll keep reading it, Part 2, 3, how many parts there are.

I took the one month subscription just to see. And if there's anything good that comes out of it, I'll keep people posted. We definitely love the support. If you're interested in supporting us on Joint TCI, it's $15 a month. You can see the full videos, our monthly portfolio updates, and you can have the podcast episode ad-free. If not, I mean, we really appreciate it. We also have a YouTube channel, been posting a video once a week, a little seven, 10-minute clip kind of cleaned up with some graphics as well. And another one for the Canadian Real Estate Investor podcast.

We'll make sure you subscribe to that. The link is in the show notes. So you still, you get to see our two beautiful bald faces on YouTube. So thank you everyone for listening and we will see you on Monday. The Canadian Investor podcast should not be construed as investment or financial advice. The host and guests featured may own securities or assets discussed on this podcast. Always do your own due diligence or consult with a financial professional before making any financial or investment decisions.