Michael Burry's short report has also been widely circulating, accusing Maga Tech companies, understating depreciation related to expensive chips ( he also promised more details on Nov 25 ), thus inflating profit margins.
What is your view on these concerns ?
Where do you see a floor for CLS ?
Thank You
The concerns around depreciation are warranted and ironically, this recent softness in AI names likely helps to moderate the risks of things getting too bubbly too quickly in AI. It looks like that in a lot of cases, the GPU lives might be longer than expected where companies are able to re-rent older GPUs at competitive rates adn the useful life is holding up. Also, while some companies will need the cutting edge GPUs, there will also be a base level of compute that is needed that can roll over to the other, older versions of GPU's in a lot of cases. So, we don't think it is a case of older GPU versions becoming obsolete when the new ones come out. Overall the concerns are something to consider but we think they are a bit overblown at this stage.
CLS looks lik it is maybe finding a bit of support in the $400 range. Not much has really changed at the company but the shares will be volatile in the short-term and we would view NVDA earnings as a potential 'catalyst' to help soothe nerves in the AI space.