"Big Short" Investor Michael Burry Just Placed a Big Wager Against Artificial Intelligence (AI) Giants Nvidia and Palantir -- and History Is on His Side

Michael Burry's Scion Asset Management's latest 13F filing indicates significant bearish wagers against AI leaders Nvidia and Palantir Technologies, with notional put option positions valued at approximately $186.6 million and $912.1 million, respectively. Burry, known for his successful bet against the 2008 housing market, appears to be anticipating a correction in these high-flying stocks, citing historical patterns of 'next-big-thing' bubbles and the companies' elevated price-to-sales ratios (Nvidia above 30, Palantir at 152). While acknowledging that current market conditions and growth rates could delay the impact, the filing suggests Burry's thesis is rooted in historical market precedents for speculative assets.

Analysis

Michael Burry's Scion Asset Management has initiated significant bearish positions against Nvidia (NVDA) and Palantir Technologies (PLTR) via put options, as disclosed in its latest 13F filing. These wagers represent a notional value of approximately $186.6 million for NVDA and $912.1 million for PLTR, signaling a strong conviction in a potential market correction for these AI leaders. Burry's historical track record, notably his successful bet against the U.S. housing market before the 2007 financial crisis, underpins the significance of his contrarian stance.

The rationale for these short positions is rooted in two primary historical headwinds. First, Burry points to the cyclical nature of "next-big-thing" technologies, suggesting that the current AI enthusiasm mirrors past speculative bubbles like the dot-com era, which eventually burst due to unmet lofty expectations. Second, the elevated valuations of both companies are highlighted, with Nvidia exceeding a price-to-sales (P/S) ratio of 30 and Palantir reaching an extreme P/S of 152, levels historically unsustainable for megacap companies and comparable to dot-com bubble peaks.

While Burry's thesis is grounded in historical market precedents, the article acknowledges that the timing of such a correction remains uncertain. The Federal Reserve's rate-easing cycle and the strong growth rates of Nvidia and Palantir could sustain their high valuations in the near term. Nevertheless, the analysis suggests a high probability that Burry's bearish bet will eventually prove profitable, aligning with the strongly negative sentiment observed for both NVDA and PLTR.

Key Decisions for Investors

• Investors should closely monitor the price-to-sales ratios of high-growth AI stocks like Nvidia and Palantir, considering historical precedents of unsustainable valuations in "next-big-thing" bubbles.
• Assess the implications of Michael Burry's significant bearish positions, recognizing his track record and the historical tendency for speculative technology sectors to experience corrections.
• Evaluate the long-term sustainability of these companies' growth trajectories against historical market cycles, even as near-term growth and monetary policy may support current valuations.