Renowned investor Michael Burry, who has previously voiced concerns about the AI bubble, is now taking action based on those views.
TL;DR
- Michael Burry has taken bearish positions on Nvidia and Palantir, citing AI bubble concerns.
- His fund, Scion Asset Management, bought over $1 billion in put options on these tech companies.
- Palantir CEO Alex Karp criticized Burry's shorting of companies central to AI advancements.
- Market declines in tech stocks, including Nvidia and Palantir, followed Burry's actions and analyst warnings.
Michael Burry, renowned for his accurate prediction of the 2008 housing market downturn, as depicted in the 2015 movie The Big Short, recently revealed some bearish positions on major tech firms like Nvidia and Palantir, citing worries about the inflated valuations of artificial intelligence companies. Inflated beyond their actual value.
Scion Asset Management, Burry’s hedge fund, bought more than $1 billion in put options on the two tech companies, according to regulatory filings released on Monday for the quarter ending on Sept. 30 A put option contract grants the buyer the right to profit from a decrease in share prices. Scion also revealed call options concerning Pfizer and Halliburton.
Burry has shared enigmatic social media updates concerning market indicators: “Sometimes, we see bubbles,” Burry stated in a recent X post. “Sometimes, there is something to do about it. The sole way to succeed is to refrain from participating.
On Monday, he shared a post featuring three charts, one of which was one from Bloomberg last month, illustrating the extent to which the AI surge is supported by collaborations with two specific firms. Nvidia and OpenAI. A different chart illustrated comparable trends in technology investment growth when comparing the present day to the dot-com period.
Scion disclosed a put reduced its Nvidia holdings in Q1 of this year and sold off almost all of its equity investments. While the fund’s earlier filing said the disclosed puts “may serve to hedge long positions which are not eligible to be reported,” the most recent filing did not contain the same statement.
On Tuesday, Palantir CEO Alex Karp criticized Burry's action during an interview with CNBC's “Squawk Box”.
“The two companies he’s shorting are the ones making all the money, which is super weird,” Karp said. “The idea that chips and ontology is what you want to short is batsh-t crazy.”
“He’s actually putting a short on AI….It was us and Nvidia,” he added.
A swelling AI bubble
Burry isn't alone in paying attention to warnings about the AI industry, an area that's experienced unprecedented investment yet little profitability so far. The Nasdaq fell 1.5% immediately opened on Tuesday, despite the S&P 500 experiencing an initial decline of approximately 1%. Technology shares are spearheading the decline, with Palantir's stock price plummeting by as much as 16% after its earnings announcement on Monday, even though it surpassed revenue forecasts.
“Their results were good, but markets were disappointed at the lack of company visibility for the whole of 2026,” Deutsche Bank researcher Jim Reid said in a note to investors.
As of Tuesday morning, Nvidia was also trailing, experiencing a decline of over 2%. The semiconductor giant reached the world’s first $5 trillion company last week. Tech companies including Oracle, Microsoft, and Apple are also experiencing a decline in their stock prices.
Year-to-date, Nvidia's stock has climbed approximately 46%, while Palantir's has surged around 157%.
Tuesday's sharp market declines also occurred after Goldman Sachs and Morgan Stanley chief executives shared their views, stating they expect a major stock market correction. During the Global Financial Leaders’ Investment Summit in Hong Kong on Tuesday, Goldman Sachs CEO David Solomon indicated that equity markets could experience a 10% to 20% decline over the coming 12 to 24 months. Ted Pick, CEO of Morgan Stanley, concurred.
“We should also welcome the possibility that there would be drawdowns, 10-to-15% drawdowns that are not driven by some sort of macro cliff effect,” he said.
Scion Asset Management declined to comment when approached by Fortune.