Innovation3 min(s) read
The Big Short's Michael Burry bets $1 billion on event that could be catastrophic for the world economy
Michael Burry, the investor who predicted the 2008 housing crash and inspired The Big Short, is making another huge bet - this time against the booming AI industry.
New filings show that his hedge fund, Scion Asset Management, has placed about $1.1 billion in bets that Nvidia and Palantir, two major AI companies, will see their stock prices drop.
The move has rattled Wall Street investors and sparked fears that the meteoric rise of AI stocks could soon come crashing down.
Michael Burry placed a $1 billion bet against tech giants. Credit: Jim Spellman / Getty
"Sometimes, the only winning move is not to play"
The 54-year-old has remained tight-lipped since the filings emerged. However, just last week, he posted a cryptic warning on X, a picture of Christian Bale portraying him in The Big Short.
The caption read: “Sometimes, we see bubbles. Sometimes, there is something to do about it. Sometimes, the only winning move is not to play.”
The move appears to signal that the investor sees parallels between today's AI stock frenzy and the mortgage-backed securities bubble that led to the 2008 financial crisis.
“Michael Burry has a history of making large bearish bets when he perceives there to be a bubble,” said James Kardatzke, co-founder of Quiver Quantitative. “This new disclosure suggests that he now believes there is an AI bubble which is due to pop.”
The Companies In Burry’s Crosshairs
Burry’s hedge fund has reportedly bet $900 million against Palantir and $187 million against Nvidia, according to filings.
Nvidia, now the world’s most valuable chipmaker, has shifted heavily into AI hardware and recently became the first company to cross the $5 trillion market cap mark.
Palantir, known for its work with US intelligence agencies, uses intricate AI-driven data analysis tools and has seen its stock trade at over 200 times forward earnings.
Even though both companies have been successful, Burry doesn’t seem to believe their high stock prices will last.
His big bets caused an immediate market reaction. According to the Daily Mail, Palantir’s stock dropped nearly 9%, even after a 63% jump in quarterly revenue. Nvidia fell 2.5%, wiping out $34 billion in value.
Broader markets followed suit, with the Dow Jones falling 410 points, the S&P 500 sliding 1%, and the Nasdaq tumbling 1.6%.
Analysts compared Burry’s move to his famous 2008 prediction. “We’ve seen this movie before,” one said, referencing The Big Short.
Adam Crisafulli of Vital Knowledge added: “Our biggest complaint about US equities is the extremely disjointed state of breadth, whereby a handful of tech mega-caps have masked red flags beneath the surface.”
Even Goldman Sachs CEO David Solomon recently warned of a possible 10-20% market correction within the year.
Burry’s hedge fund has reportedly bet $900 million against Palantir and $187 million against Nvidia. Credit: Dimitrios Kambouris / Getty
Palantir CEO Hits Back
Palantir CEO Alex Karp lashed out at Burry and other short sellers during a fiery live interview on CNBC.
“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 bats**t crazy.” He continued: “He’s actually putting a short on AI … It was us and Nvidia.”
Karp accused short sellers of market manipulation and declared he would be “dancing around” when their bets failed.