In a bold and contrarian move that has sent ripples through the markets, famed investor Michael Burry has placed roughly $1.1 billion in bearish bets against two of the biggest names in artificial‑intelligence‑driven stocks — Nvidia Corporation and Palantir Technologies.
1. The Move
Burry’s hedge fund, Scion Asset Management, disclosed that it bought large volumes of put‑options (which profit if the underlying stock falls) on these two companies: about 5 million shares of Palantir (with notional value ~US$912 million) and about 1 million shares of Nvidia (~US$187 million).
The move comes at a time when both companies are at the heart of the AI boom: Nvidia recently hit a market capitalization of around US$5 trillion, and Palantir has witnessed massive investor enthusiasm and a very high valuation despite modest revenue.
2. Why Burry Is Doing It
Burry’s rationale appears rooted in concern about hype, valuation excesses and the possibility of a bubble in the AI‑sector. Key elements include:
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He posted a cryptic message recently: “Sometimes, we see bubbles… sometimes the only winning move is not to play.”
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He flagged slowing growth in adjacent themes (for example cloud revenue growth) even as AI investment escalates.
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He appears to view both Nvidia and Palantir as vulnerable to disappointment given the very high expectations baked into their stock prices. For example, Palantir’s price‑to‑sales and P/E ratios are extremely elevated.
3. Market Reaction & Broader Implications
The disclosure of Burry’s positions appears to have triggered market jitters:
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Palantir’s share price reportedly dropped more than 8 % on the news. Nvidia declined about 4 %.
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Analysts and commentators highlight this as a wake‑up call: if the AI theme falters, broad segments of the tech market could suffer.
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It raises the question: Are we witnessing an innovation‑wave that will reshape industries, or a mania built on expectations that may be unrealistic? The two aren’t mutually exclusive, but timing and execution matter.
4. Risks and Counterpoints
While Burry’s move is provocative, there are significant caveats and risks:
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If Nvidia and Palantir continue to deliver strong results (or at least keep investor confidence high), Burry’s bearish bets could backfire. Market momentum can override fundamentals for a time.
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The exact structure of the options (strike prices, expirations) isn’t fully public, so the full risk profile is unknown. Some outlets suggest that the scale may be smaller than the “$1.1 billion” headline.
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AI and related technologies still present real, long‑term potential across many sectors — dismissing growth opportunities outright may be premature.
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Burry historically is very good at detecting bubbles, but he has had false alarms and periods where he’s “early.” Being early means waiting — which can be painful.
5. What This Means for Investors
For the average investor, Burry’s bet offers several take‑aways:
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Valuation matters: High growth is attractive, but when expectations are maxed out, the margin for error shrinks.
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Contrarian views matter: Sometimes following the crowd (“everyone is in AI”) can expose one to systemic risk; having a differentiated view can help.
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Risk management is critical: If you have investments in high‑flying tech stocks, consider whether your portfolio is balanced and whether you can tolerate a sharp reversal.
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Timing is unpredictable: Even if Burry is right in the long term, the path may be volatile. Patience (and discipline) matter.
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Focus on fundamentals: Hype sells, but earnings, competitive moats, margins, and execution ultimately drive long‑term value. If the story is purely “future promise,” the risk is greater.
6. Final Thoughts
Michael Burry’s recent wager against Nvidia and Palantir is more than just a headline‑grabbing trade: it’s a statement of skepticism toward the broader AI‑led rally and its underpinning assumptions. Whether he’s early or spot‑on remains to be seen.
What he certainly has done is remind the market — loudly and unmistakably — that regardless of how hot a theme gets, risk doesn’t disappear. As Ken Fisher once said: “Market expectations are the enemy of return.”
For investors, the key may not be to bet against AI, but to ask: Can the companies I own justify the lofty price I’m paying? If the answer is fuzzy, perhaps a rethink is warranted.
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