Michael Burry Bets Against AI, Citing 'Dot-Com Bubble' Echoes
Scion Asset Management's latest filing reveals significant bearish put options against high-flying sector leaders Nvidia and Palantir.
Michael Burry, the investor famed for his prescient bet against the 2008 housing market, has taken a significant bearish stance on the artificial intelligence boom, initiating large put option positions against semiconductor giant Nvidia (NVDA) and data analytics firm Palantir (PLTR).
The move, disclosed in Scion Asset Management’s third-quarter 13F filing made public on November 3, aligns with Burry’s recent public warnings comparing the speculative fervor in AI stocks to the dot-com bubble of the early 2000s. Put options grant the holder the right to sell a stock at a specified price, making them a popular tool for betting on a security's decline.
The bet places Burry in direct opposition to the powerful momentum that has propelled the AI sector to staggering valuations. Nvidia, the undisputed leader in AI chip manufacturing, has seen its market capitalization swell to nearly $5 trillion. The company’s stock has soared to near its 52-week high, underpinned by a 55.6% year-over-year surge in quarterly revenue. However, this explosive growth has stretched its valuation, with the stock trading at a lofty price-to-earnings (P/E) ratio of approximately 58.
Palantir, another key player in the AI software space, presents an even more extreme valuation case. The company's stock is trading at a P/E ratio exceeding 600, a figure that has attracted intense debate among investors about its sustainability.
Burry’s bearish turn on AI is not entirely new but marks a significant re-escalation. After previously closing a short position against Nvidia, his firm's new positions suggest a renewed conviction that the market's enthusiasm has outpaced fundamentals. This contrarian position is reminiscent of his strategy detailed in "The Big Short," where he identified systemic risk in an asset class that the broader market viewed as infallible.
His latest move comes as a wider conversation about a potential AI bubble gains traction. While bulls point to transformative productivity gains and a new technological era, some analysts and investors are beginning to question whether current stock prices fully account for future growth, leaving little room for error. The sheer scale of capital flowing into the sector has drawn parallels to the internet boom and bust of 2000, when many technology companies with promising ideas but little profit ultimately collapsed.
Despite the high-profile nature of Burry's bet, the market's immediate reaction has been muted, underscoring the powerful bullish sentiment that continues to dominate the AI narrative. Both Nvidia and Palantir shares have remained resilient in recent trading sessions. For now, the market appears caught in a tug-of-war between the powerful growth story of AI and the cautionary notes sounded by prominent value-oriented investors like Burry.
As the market digests this move, all eyes will turn to upcoming earnings reports and technology benchmarks to see whether the sector's monumental growth can continue to support its sky-high valuations, or if Burry's latest "big short" will once again prove prophetic.