Aggressive stock-based compensation inflates tech earnings
Michael Burry's thesis argues that aggressive stock-based compensation (SBC) masks the true valuation of leading AI and tech companies, making them far more expensive on an owner's earnings basis.
The argument
The hosts highlighted Burry's argument that when adjusting for SBC, NVIDIA's true multiple is closer to 60x rather than the optical 30x. This mirrors late-1990s behavior where aggressive accounting and market euphoria decoupled stock prices from underlying economic reality.
The thesis, stress-tested
✓ What validates it
- ✓An increase in share count dilution that offsets reported EPS growth
- ✓A deceleration in CapEx spending by major hyperscalers
▸ Risks discussed
- ▸Market participants continuing to ignore SBC dilution as long as revenue growth remains high
- ▸Sustained exponential demand for AI chips delaying any valuation correction
Hear it yourself
"What what was his what was his Palantir Nvidia? What is his Palantir Nvidia thesis? It's around stock based comp and that they're aggressive with that. And if you do an actual kind of owner's earnings, look at it. Like, NVIDIA's trading it more like 60 times and not 30 times, if I remember what he said correctly."
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