What to know as Michael Burry bets against Nvidia and Palantir

Astrid Stawiarz

Fears over tech stocks have weighed on the market this week, with the Nasdaq Composite (COMP:IND [https://seekingalpha.com/symbol/COMP:IND]) down 3.5% since Monday. Helping stoke valuation concerns was a new bearish bet by "Big Short" investor Michael Burry, who took out put options against two of the highest flyers in the AI industry [https://seekingalpha.com/news/4514017-michael-burrys-big-short-instincts-target-ai-trade-with-puts-on-nvidia-palantir] - Nvidia (NVDA [https://seekingalpha.com/symbol/NVDA]) and Palantir (PLTR [https://seekingalpha.com/symbol/PLTR]). The disclosure came in a 13F filing, which revealed a $1.1B bet that grabbed industry attention, though it's worth doing a little digging past the headlines.

_Bigger picture: _13Fs don't tell the whole story about what private funds are up to, and could reflect a position that Burry took weeks ago, but was (or will soon be) closed following the bearish bombshell. He executed a similar high-turnover move in the summer of 2023, when he made a $1.6B put bet against the S&P 500 (SP500 [https://seekingalpha.com/symbol/SP500]) and Nasdaq, only to close the entire position in the following quarter [https://seekingalpha.com/news/4036823-nasdaq-exits-correction-territory-small-caps-rebound-in-russell-revenge]. The latest 13F was also strangely filed more than a week ahead of the typical deadline, and was published immediately following Palantir's earnings (causing the stock to tank despite record results [https://seekingalpha.com/news/4513250-palantir-pops-as-it-boosts-full-year-guidance-on-back-of-strong-q3-results] and triggering fierce response from CEO Alex Karp [https://seekingalpha.com/news/4514340-palantir-ceo-alex-karp-slams-big-short-investor-burry-for-betting-against-palantir-nvidia]). It's also important to note that the "billion-dollar headlines" are notional values, meaning Burry would've only had to put up a fraction of that number to secure the options, albeit one that's a high-stakes wager for his Scion Asset Management.

Recall that Burry has attempted to call many doom-and-gloom scenarios in recent years, including "the greatest speculative bubble of all time in all things" and "the mother of all crashes." [https://seekingalpha.com/news/3732590-dow-jones-nasdaq-trade-lower-to-end-week] His big bets against Tesla (TSLA [https://seekingalpha.com/symbol/TSLA]), another high-flyer in 2021, didn't pan out well, or selling out on his significant position in GameStop (GME [https://seekingalpha.com/symbol/GME]) only months before the "Wall Street Bets" rally took the stock to new heights. However, Burry has had success in other calls, like his bullish position this year on Estée Lauder (EL [https://seekingalpha.com/symbol/EL]), as well as his contrarian calls last year on Alibaba (BABA [https://seekingalpha.com/symbol/BABA]) and JD.com (JD [https://seekingalpha.com/symbol/JD]).

TIME WILL TELL: Corrections are part of any market cycle and that could very well happen given the current concentration in a handful of tech stocks. However, timing the market is always a risky endeavor, and it may be better to stay fully invested barring the belief of a serious downturn. While warnings of an AI bubble have been touted for years, given price-to-earnings ratios and massive amounts of capital spending, there are also significant differences compared to the dot-com era. The leading AI players today are highly profitable with strong cash flows, and have a market that is ready and eager to rapidly adopt revenue-generating tools and efficient models.

MORE ON NVIDIA, PALANTIR

* Palantir: Great Quarter, Greater Caution [https://seekingalpha.com/article/4839687-palantir-great-quarter-greater-caution]
* Nvidia: Now Is The Time To Double Down (Upgrade) [https://seekingalpha.com/article/4839541-nvidia-now-is-the-time-to-double-down-upgrade]
* Wall Street Lunch: Nvidia's Jensen Takes U-Turn After Saying China Will Win AI Race [https://seekingalpha.com/article/4839433-wall-street-lunch-nvidias-jensen-takes-u-turn-after-saying-china-will-win-ai-race]
* U.S. won't permit Nvidia to sell scaled-down AI chip to China - report [https://seekingalpha.com/news/4518294-us-wont-permit-nvidia-to-sell-scaled-down-ai-chip-to-china]
* Nvidia signs $2B MOU with Kazakhstan for advanced chips [https://seekingalpha.com/news/4517721-nvidia-signs-2b-mou-with-kazakhstan-for-advanced-chips]