Nvidia stock is described as vulnerable to an aggressive decline based on options positioning, trading volume, and underlying fundamentals. Trading volume on a 50-day moving average basis is characterized as the lowest since 1999, alongside a lack of hedging activity attributed to relatively cheap put options. A potential drop is expected to be more dramatic than prior major crashes, with few buyers appearing during the fall due to insufficient structural demand and reduced market-maker support. Customer concentration is flagged as unusually high, with top customers accounting for a large share of accounts receivable. Inventory timing by major customers is suggested to have been pulled forward, potentially creating a “bullwhip” effect as demand normalizes.
"“The conditions for an aggressive fall are as strong as they have been in the history of the stock,” Burry wrote in a Monday post. The investor of “The Big Short” fame known for making prescient calls and dire predictions added that Nvidia's next decline could be “more dramatic” than its last three big crashes of 56% in 2018, 67% in 2021, and 43% in 2025. Burry said his view was based on options and stock market volume as well as fundamentals."
"He noted that trading volumes of Nvidia stock, on a 50-day moving average basis, are at their “lowest since 1999.” He added that there's a “dearth of hedging activity” because it's cheaper to buy put options on Nvidia than for similar stocks. He said that if Nvidia stock does fall, he expects “very few buyers on the way down” due to insufficient structural demand and market makers having to back off."
"In a Friday post, Burry flagged that Nvidia's customer concentration is “off the charts,” exposing it to a major revenue hit if its biggest buyers pull back. Nvidia's recent earnings showed that its top three customers were responsible for 64% of its accounts receivable, up from 56% in the preceding quarter, he noted. Burry also pointed out that its No. 1 customer accounted for more of Nvidia's accounts receivable, but less of its revenue, for the first time in 13 quarters."
"“This is not quite a smoking gun, but more of a finding of a finger on the trigger,” he wrote. Burry suggested Microsoft pulled forward inventory that it “does not really need” as it's slowing down its data-center buildout, because it wanted to keep its priority spot for Nvidia's next chip, or Nvidia pushed inventory forward to flatter its earnings. He said that could pave the way for a “wicked bullwhip,” referring to how a small"
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