Michael Burry Warns of 1987-Style Drop as Nvidia Turns Chips Into Collateral

In the latest episode of DH Unplugged, hosts Andrew Horowitz and John C. Dvorak tackle a summer news cycle that refuses to slow down. Despite the episode's title, 'The Doldrums,' the co-hosts argue that every headline is being amplified as investors question whether all-time highs are sustainable or a prelude to a reversal. The discussion spans from strategic oil reserves at 10% of prior levels to Michael Burry's fresh top call, and Nvidia's audacious new financing scheme, painting a picture of a market that hates itself but keeps climbing.

Michael Burry, famed for his 'Big Short' bet, has issued a warning of a possible 1987-style drop while shorting Palantir, Nvidia, and Tesla via options. This has reignited fears of an impending correction. Horowitz notes, 'Markets live much more in the all-time high range than in the all-time lows. In fact, it's very difficult, if not impossible, for the markets to hit an all-time low.' Dvorak counters with a lens on Jensen Huang's strategy at Nvidia, remarking, 'It's more important to be depended on than to be profitable,' and warns that an Nvidia unwind could combine 1999 enthusiasm with 2007 financialization at far greater magnitude.

The deeper dive lands on Nvidia's move to make compute an investable asset class. Horowitz and Dvorak explain how hyperscaler depreciation schedules collide with Nvidia's accelerating product cycle, and why collateralizing compute—rather than the underlying silicon—is Jensen Huang's answer to nervous financiers. Nvidia has preliminary agreements with Apollo, BlackRock, Brookfield, Goldman Sachs, and KKR to mobilize $500 billion for AI infrastructure. This scheme effectively turns chips into collateral, a move that could reshape the financing of AI infrastructure.

Elsewhere, the episode covers a range of market-moving stories: Etsy cutting 220 jobs (roughly 12% of staff) while authorizing a $2 billion buyback; Chipotle's salmonella outbreak tied to jalapenos; and Sweetgreen's Taylor Farms disaster. Eli Lilly's Mounjaro and Zepbound posted impressive quarterly sales of $9.94 billion and $4.93 billion, respectively. The co-hosts also unpack Berkshire Hathaway's first net-buyer quarter in 14 quarters under Greg Abel, a new 15% tariff on polysilicon solar imports, drone tariffs benefiting Unusual Machines (UMAC), and Donald Trump Jr.'s stake in that name. They also touch on Treasury Secretary Scott Bessent's Trump-flavored superlatives and the still-unrecovered 18-karat gold toilet ripped from Blenheim Palace.

The show's signature blend of skepticism and humor runs throughout, offering listeners a critical lens on the market's current state. As the summer doldrums prove to be anything but quiet, this episode provides valuable insights into the forces shaping the market's trajectory.