When Michael Burry decided to short Nvidia (NVDA), he wasn’t betting against the company’s technology. It was a bet against the AI financing structure and macroeconomic conditions. We know today that he is losing money on this bet as Nvidia inches toward its all-time highs. But Burry isn’t sitting idle with his short position. He recently took to social media platform X, posting about a startup that could challenge Nvidia’s dominance.
Here’s what Burry’s post is about. A small startup is making a big claim against Nvidia. Founded by a group of Harvard dropouts, Etched is building a chip called Sohu. What the chip does is run transformer models, the architecture behind most of today’s artificial intelligence. By designing the chip to do only that, Etched says it can run AI inference far faster and cheaper than Nvidia’s general-purpose GPUs. It recently raised money at a $21 billion valuation. But to see why challengers like Etched are emerging, it helps to understand how AI actually runs.
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Why Is Etched Gaining Traction?
AI runs in two phases. Training teaches a model, and inference is when the model answers queries. Inference is where the volume is heading as AI gets used more. It is also the area where specialized chips like Etched’s — or custom silicon from Amazon (AMZN), Alphabet (GOOGL), and Broadcom (AVGO) — can compete the hardest. Nvidia dominates AI computing, but inference is an area where specialized chips can compete.
This is why the noise around challengers keeps growing. On Nvidia's last earnings call, CEO Jensen Huang pushed back firmly. He argued that building AI infrastructure is genuinely hard and that most custom-chip projects never reach real production. So far, Nvidia’s dominance has held, with the company continuing to lead the AI chip market. The company will report earnings next on Aug. 26, and investors will want to know whether its inference business is still growing fast enough to stay ahead of rivals. Startups like Etched make the headlines. The earnings call is where investors will find out if they’re a real threat or just noise.
Here’s Why Burry Looks Like He Is Fishing
Nvidia isn’t going away anytime soon because, for any company to compete against Jensen Huang, it also has to secure corresponding manufacturing capacity.
The global semiconductor supply chain is like a chessboard right now. You cannot just send out an order to manufacture chips because the leading companies of the world are already fighting hard to secure as much production capacity as they can. No startup is going to walk into a company like Taiwan Semiconductor (TSM) and ask for capacity already booked by trillion-dollar businesses.
So, when Burry says Etched offers “serious competition” for Nvidia, he’s really just fishing. The technology is amazing, but it isn’t replacing Nvidia or helping anyone short on the best chip designer in the world.
About Nvidia Stock
Nvidia is a leading technology company that develops advanced computer chips, AI systems, and software used across industries worldwide. It operates through two segments: Compute & Networking and Graphics. The Compute segment provides AI chips, data-center hardware, networking products, and software that powers artificial intelligence, cloud computing, and autonomous vehicles, while the Graphics segment produces gaming GPUs and professional graphics cards used in gaming, content creation, and enterprise workstations. Founded in 1993, Nvidia is headquartered in Santa Clara, California.
NVDA stock has been fairly volatile in 2026, climbing from as low as $164 in late March to a 52-week high of $236.54 on May 14, then falling back down to roughly $190 by the end of July. Over the past year, Nvidia has gained approximately 18%, underperforming the iShares Semiconductor ETF’s (SOXX) gain of 101% during the same period. NVDA stock has underperformed the broader sector because the AI rally broadened beyond a single company. Moreover, the firm has faced China export restrictions and the challenge of sustaining rapid growth from an already massive market capitalization.
www.barchart.com Nvidia is the most valuable company in the world right now. Yet NVDA stock looks surprisingly reasonable compared to its historical norms. The forward price-to-earnings (P/E) ratio of 25.1 times trades at an extraordinary discount, sitting well below its five-year average of around 52 times. Meanwhile, the price-to-sales (P/S) ratio sits at 24.3 times. What makes these valuations even more striking is that this is a company at the center of the AI boom.
The EPS outlook also looks decent. Analysts expect earnings growth of 92% in fiscal 2027 and 43% in fiscal 2028. Although earnings growth is expected to decelerate, the numbers are still strong for a company of this scale. The balance sheet also adds further strength, with Nvidia deeply net cash positive.
So, the picture is a market leader growing into a valuation that, by its own standards, isn’t stretched. The competition from custom chips and startups like Etched is the risk worth watching, since the entire case rests on that growth holding. But as long as it does, Nvidia isn’t the expensive stock its size might suggest.
Nvidia Reinforces AI Growth Story With Strong Q2 Revenue Guidance
Nvidia reported first-quarter fiscal 2027 earnings on May 20. Revenue came in at $81.6 billion, up 85% year-over-year (YOY). Of this, data-center revenue was $75.2 billion, up 92% YOY. Meanwhile, EPS came in at $1.87, beating the Wall Street consensus of $1.77. The company’s GAAP gross margin for the quarter was 74.9%, while free cash flow stood at $48.6 billion, up from $34.9 billion in Q4 2026.
Nvidia is set to announce Q2 fiscal 2027 earnings on Aug. 26. Total revenue is expected to be $91 billion, plus or minus 2%. GAAP and non-GAAP gross margins are expected to be 74.9% and 75%, respectively. For the full year, the company expects operating expenses growth to be somewhere in the upper 40% range on a YOY basis.
The company announced significant investments in AI infrastructure and new product launches, including the Vera CPU and Rubin GPU systems, which are expected to contribute to future revenue growth. On the Q1 earnings call, Cantor Fitzgerald analyst Christopher Muse asked how Nvidia’s upcoming Vera Rubin AI platform could affect its position in the AI inference market. CEO Jensen Huang said that Nvidia is rapidly gaining market share in AI inference and believes its next-generation Vera Rubin platform will be even more successful than Grace Blackwell, helping the company strengthen its AI leadership.
What Do Analysts Expect for NVDA Stock?
Bank of America Securities analyst Vivek Arya recently reiterated a “Buy” rating on NVDA stock and assigned a price target of $350. The analyst believes Nvidia looks attractively valued at current prices, and said the market is heavily discounting shares due to concerns over growing financing commitments. In addition, Stifel Nicolaus analyst Ruben Roy maintained a “Buy” rating with a price target of $282.
Based on 48 Wall Street analysts with coverage, Nvidia holds a consensus “Strong Buy” rating. The mean target price of $306.22 implies potential upside of 46% from current levels. The lowest price target is $180, while the high price target of $500 points to healthy expected upside. Overall, many analysts seem to believe that investors are undervaluing a company that has consistently beaten on revenue and earnings.
www.barchart.com On the date of publication, Jabran Kundi did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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