Alright, let's get straight to it. Michael Burry, the guy who called the 2008 housing crash, is making waves again. This time, he's betting against the AI boom, specifically Nvidia (NVDA) and Palantir (PLTR). Last week, Burry posted on X warning of an AI bubble, his first tweet since April. Then came the 13F filings.
Scion Asset Management's latest filing shows massive put options (essentially bets that the stock price will fall) on Nvidia and Palantir. We're talking about $186.58 million in Nvidia puts and a whopping $912.10 million in Palantir puts. That's roughly 80% of Scion's total holdings. Zero positions in either company last quarter, now this. That's a statement.
The Data Behind the Doubts
Burry's not just throwing darts. He shared a chart showing slowing cloud revenue growth at Amazon, Microsoft, and Google. The cloud is the infrastructure that powers a lot of AI, so slowing growth there suggests the AI party might not last forever. He also pointed out the widening gap between tech capital spending growth and the combined spending growth for the tech, media, and telecommunications (TMT) sector. It’s a discrepancy worth noting.
Then there's the circular deal criticism. Burry highlighted Amazon's $38 billion partnership with OpenAI. It's the big firms paying each other, then claiming the sector is booming (the money goes round and round). He even dug up an old Fortune article from 2002 about the telecom bust. Remember that? Overhyped technology, massive spending, and then… bust.
Scion also dumped a bunch of other positions. Buy options in Alibaba, JD.com, ASML, Meta Platforms, V.F. Corp., and Estee Lauder are gone. Sold shares and call options in Regeneron and UnitedHealth, plus shares of MercadoLibre. On the flip side, they doubled down on Lululemon (LULU) (though sold the call options), and added bullish call options on Halliburton (HAL), and purchased shares of Molina Healthcare (MOH) and SLM Corp, as well as call options in Pfizer (PFE). These all appear to be a play to counter inflation.
Retail vs. Reality
Now, let's look at the retail investor sentiment. According to Stocktwits, retail sentiment toward Nvidia tempered to ‘bullish’ by early Tuesday from ‘extremely bullish’ a day before. The 24-hour message volume on Stocktwits regarding Nvidia also reduced, but was at ‘high’ levels. Meanwhile, retail sentiment toward Palantir stock remained ‘extremely bullish’ as of early Tuesday, with the chatter perking up to ‘extremely high’ levels.
This is where things get interesting. There's a disconnect between what the "smart money" (Burry) is doing and what the average investor thinks. Are retail investors just caught up in the hype? Is Burry early, or wrong?
Here's my take: The market is often irrational in the short term. Nvidia's stock is up 54% year-to-date, pushing it over the $1 trillion market cap mark. Palantir is up nearly 175% for the year-to-date period. Those are insane numbers. The question is, can these companies justify those valuations? I've looked at hundreds of these filings, and the speed with which Burry moved to a short position is unusual.
Marko Kolanovic, a former JPMorgan and BofA strategist, agrees with Burry's assessment. That’s not a huge surprise. It's always easier to criticize when you're no longer in the arena.
Is It 2008 All Over Again?
Look, Burry is famous for a reason. He saw the housing crisis coming when almost everyone else missed it. But that doesn't make him infallible. Markets change. Technology evolves. What worked in 2008 might not work today. The AI space could keep growing, valuations be damned. The question is, will it grow enough to justify the current valuations?
The slowing cloud revenue growth is concerning, but is it a blip or a trend? The circular deals are definitely shady, but are they widespread enough to bring down the whole sector? And are retail investors really that wrong? Sometimes, the crowd gets it right.
The House Always Wins... Eventually
Burry's bet is a high-stakes one. He's betting against two of the hottest stocks in the market. He’s putting almost all his eggs in one short basket. If he's right, he'll make a killing. If he's wrong, well, it won't be the first time a hedge fund manager has blown up. But let's remember the historical context here. Burry isn’t just some random guy. He's got a track record. And he's not afraid to go against the grain. According to Stocktwits, Burry's actions are a " Big Short 2.0? Michael Burry Bets Against Nvidia, Palantir Stocks In Stark Warning Against AI Euphoria: ‘Move Along’."
