‘Big Short’ investor Michael Burry follows up cryptic AI bubble warning with bearish stock activity on Nvidia and Palantir

Michael Burry's Scion Asset Management disclosed over $1 billion in put options against Nvidia and Palantir, signaling a significant bearish bet on the AI sector due to concerns over inflated valuations and a potential "AI bubble." This high-profile move, which drew criticism from Palantir's CEO, aligns with broader tech stock declines and recent warnings from Goldman Sachs and Morgan Stanley CEOs who anticipate a 10-20% market correction within the next 12-24 months, underscoring increasing skepticism about current market highs.

Analysis

Michael Burry's Scion Asset Management has disclosed significant bearish positioning, acquiring over $1 billion in put options against Nvidia (NVDA) and Palantir (PLTR) for the quarter ending September 30. This aggressive move signals Burry's conviction regarding an "AI bubble" and inflated valuations within the tech sector, echoing his historical market foresight. The absence of a hedging statement in the latest filing, compared to Q1, suggests a more direct short position.

This high-profile bet coincides with broader market weakness, as the Nasdaq fell 1.5% and the S&P 500 dropped 1% on Tuesday, led by tech stocks. Palantir (PLTR) shares declined 16% despite beating revenue expectations, primarily due to market disappointment over a lack of visibility for 2026 guidance, while Nvidia (NVDA) was down over 2%. These declines follow substantial year-to-date gains for NVDA (46%) and PLTR (157%), highlighting potential valuation sensitivity.

Adding to the bearish sentiment, CEOs from Goldman Sachs and Morgan Stanley have warned of a potential 10-20% equity market drawdown within the next 12-24 months. While Palantir's CEO Alex Karp dismissed Burry's short as "bats--t crazy," the collective signals from prominent investors and market leaders suggest increasing caution regarding current market highs and tech sector valuations. Burry's simultaneous call options on Pfizer (PFE) and Halliburton (HAL) indicate a potential rotation or hedging strategy.

Key Decisions for Investors

• Investors should critically re-evaluate their exposure to high-growth AI and tech stocks, considering the increasing skepticism from prominent investors and potential valuation risks
• Monitor corporate guidance and forward-looking statements closely, as demonstrated by Palantir's post-earnings reaction, which prioritized future visibility over current revenue beats
• Consider implementing hedging strategies or diversifying portfolios into sectors with more stable fundamentals, akin to Burry's long positions in Pfizer and Halliburton, to mitigate potential market drawdowns