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Burry's Billion-Dollar Bets: Genius or Just Gambling?
Michael Burry, the man who made a killing betting against subprime mortgages in 2008, is at it again. His latest 13-F filing reveals massive put options positions against Nvidia and Palantir. Roughly $1.1 billion, to be exact. That's a hefty chunk of Scion Asset Management's disclosed holdings – around 80%. The question, of course, is whether this is another stroke of Burry's prescient genius, or just a contrarian bet gone wild.
Nvidia, the darling of the AI boom, has seen its stock price skyrocket this year. Up 50%, crossing the $5 trillion market cap threshold. Palantir isn't far behind, up a staggering 176%, fueled by consistent earnings beats and optimistic revenue guidance—nearly $4.4 billion projected for the full year. On the surface, betting against these two seems…foolhardy.
But let’s dig a little deeper. Burry himself warned of market "bubbles" on X, stating, “sometimes the only winning move is not to play.” This isn’t just about individual companies; it’s a macro call. Are these valuations justified? Or are they the product of irrational exuberance, fueled by the AI hype machine? I’ve looked at hundreds of these filings, and this level of concentration in two, albeit high-growth, tech stocks is unusual, to say the least.
There’s also the question of timing. The 13-F filing reflects positions as of September 30th. A lot can happen in a quarter. It is possible that Burry has already unwound these positions. We simply don't know. What we do know is that Palantir’s stock has taken a hit since its earnings announcement, down 6.6% as of Tuesday morning. Nvidia was down too, about 1.8%. Is this the beginning of Burry's prediction coming true, or just a temporary blip?
One thing that strikes me is the sheer size of the Palantir bet – roughly $912 million. Given Palantir’s association with government contracts and, shall we say, controversial data practices, is Burry betting against the long-term sustainability of its business model? Or is it purely a valuation play? Details on Scion's internal risk models remain scarce, but the position size suggests a high degree of conviction. And this is the part of the report that I find genuinely puzzling. Why Palantir? Michael Burry, of “Big Short” fame, discloses ~$1.1 billion options bet against Nvidia and Palantir
Valuation Check: Hype vs. Reality
The core issue here is valuation. Are Nvidia and Palantir trading at levels that are fundamentally unsustainable? Nvidia's price-to-earnings ratio is astronomical (currently hovering above 70), reflecting massive expectations for future growth. Palantir, while growing rapidly, isn’t exactly cheap either. Its valuation is predicated on continued, exponential growth in a market that is becoming increasingly competitive.
Consider the AI infrastructure arms race. Every major tech company is pouring billions into developing its own AI chips and platforms. Can Nvidia maintain its dominant position in the face of this onslaught? Similarly, Palantir faces competition from established players like IBM and newer startups offering specialized AI solutions.
And let's not forget the macro environment. Interest rates are still elevated, and the threat of a recession looms. If the economy slows down, will companies continue to invest heavily in AI? Or will they cut back on discretionary spending, impacting the growth prospects of Nvidia and Palantir? These are the questions Burry is likely asking himself.
So, What's the Real Story?
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Is This Just a Big Short Squeeze Waiting to Happen?
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Burry’s bet is a calculated gamble against the prevailing market narrative. It's a contrarian position, but one rooted in a sober assessment of valuation risks. Whether it pays off remains to be seen. But one thing is clear: Burry is betting that the AI hype has gone too far, and that reality will eventually catch up.