"The Big Short's" Michael Burry Is Betting Against Palantir and Nvidia and Buying 1 Beaten Down Apparel Stock Instead

Michael Burry's Scion Asset Management made significant bearish bets in Q3 2025, acquiring 5 million put options on Palantir ($912M notional) and 1 million put options on Nvidia ($186.5M notional), citing concerns over AI sector valuation, tech capital expenditure growth, and potential earnings overstatement by hyperscalers. Concurrently, Scion took a long position in Lululemon Athletica, purchasing 100,000 shares ($18M value) of the luxury apparel brand, which has seen its stock drop 54% this year amid consumer inflation, brand challenges, and projected tariff impacts of up to $320 million on gross margin by fiscal 2026.

Analysis

Michael Burry's Scion Asset Management initiated significant bearish positions in Q3 2025, acquiring 5 million put options on Palantir (PLTR) with a notional value of $912 million and 1 million put options on Nvidia (NVDA) for $186.5 million. Burry cites concerns over the AI sector, specifically highlighting U.S. tech capital expenditures approaching tech bubble levels and potential earnings overstatement by hyperscalers like Meta and Oracle by 21-27% by 2028 due to extended asset useful lives.

Concurrently, Scion purchased 100,000 shares of Lululemon (LULU), valued at approximately $18 million, a luxury apparel brand whose stock has plummeted 54% this year. Lululemon faces headwinds from intense inflation impacting consumer spending, perceived brand staleness, and increased competition. Management projects a significant gross margin impact from tariff changes, estimating $240 million in fiscal 2025 and $320 million in fiscal 2026.

Despite these challenges, Lululemon reported 7% year-over-year net revenue growth in the first half of 2025, though diluted earnings per share remained flat. The stock currently trades at approximately 13 times forward earnings, and international sales are performing well, contrasting with struggles in the U.S. business. The purchase could reflect a short-term value play by Scion given the stock's depressed valuation.

Key Decisions for Investors

• Investors should re-evaluate AI sector valuations, particularly for Palantir and Nvidia, considering Burry's concerns regarding tech capital expenditure growth and potential earnings overstatements by hyperscalers.
• For Lululemon, closely monitor the projected $240 million to $320 million tariff impact on gross margins and the performance of its U.S. business, despite its attractive 13x forward earnings multiple and international strength.
• Consider if the Lululemon position represents a short-term value opportunity given its significant year-to-date decline, rather than a long-term conviction based on fundamental turnaround.