"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 significantly altered its portfolio in Q3 2025, placing substantial bearish bets against AI leaders Palantir and Nvidia by purchasing put options with notional values of $912 million and $186.5 million, respectively. Burry's rationale includes concerns over U.S. tech capital expenditure growth mirroring the dot-com bubble, excessive capital circulation among AI players, and potential earnings overstatement by hyperscalers due to extended asset depreciation. Concurrently, Scion acquired 100,000 shares of luxury apparel brand Lululemon, which has seen its stock price fall 54% this year amid consumer inflation, brand perception issues, and a projected $240 million to $320 million gross margin impact from tariffs in fiscal years 2025-2026.

Analysis

Michael Burry's Scion Asset Management initiated significant bearish positions against AI leaders in Q3 2025, acquiring 5 million put options on Palantir (PLTR) with a $912 million notional value and 1 million put options on Nvidia (NVDA) for $186.5 million. This aggressive stance is driven by concerns that U.S. tech capital expenditures are nearing dot-com bubble levels and that capital circulation among major AI players is excessive.

Burry also highlighted potential accounting irregularities among hyperscalers like Meta Platforms and Oracle, alleging they may overstate earnings by 21% and 27% respectively by 2028. This is attributed to extending the useful life of infrastructure assets despite rapid product cycles, which could artificially inflate profitability.

Concurrently, Scion purchased 100,000 shares of luxury apparel brand Lululemon (LULU), valued at approximately $18 million, following a 54% stock price decline this year. Lululemon faces headwinds from intense consumer inflation, perceived brand staleness, and competition, alongside a projected $240 million gross margin impact in FY25 and $320 million in FY26 due to tariff changes.

While Lululemon's U.S. business struggled, its international sales performed well, and the stock trades at 13 times forward earnings, suggesting a potential value play despite ongoing operational challenges. Burry's portfolio shifts indicate a contrarian view, betting against high-growth AI while seeking value in a distressed consumer discretionary stock.

Key Decisions for Investors

• Investors should critically evaluate the sustainability of current AI valuations, particularly for companies like Palantir and Nvidia, given concerns about tech capital expenditure levels and potential accounting overstatements by hyperscalers.
• Monitor Lululemon's operational improvements, specifically its ability to mitigate tariff impacts and revitalize U.S. sales, while assessing if its 13x forward earnings multiple adequately discounts ongoing consumer and brand challenges.
• Consider a diversified approach, balancing exposure to high-growth sectors with potential value plays in distressed consumer discretionary names, aligning with a contrarian investment strategy.