Article Directory
Michael Burry Bets Big Against Tech: Genius Move or Just Noise?
Michael Burry, the investor who famously predicted the 2008 financial crisis, is making headlines again. This time, it's for Scion Asset Management's significant put options on Palantir (PLTR) and Nvidia (NVDA). The filing reveals a $912.1 million bet against Palantir and $186.58 million against Nvidia, according to Whale Wisdom. Is Burry seeing something the rest of the market is missing, or is this just another contrarian play?
Decoding Burry's Bearish Signals
Burry's move isn't happening in a vacuum. He's been vocal about his concerns regarding an AI bubble, even referencing Star Wars with the line, "These aren't the charts you are looking for." He posted charts comparing cloud segment growth for Alphabet, Amazon, and Microsoft from 2018-2022 to the present, and another illustrating the web of AI deals between Nvidia, OpenAI, Oracle, and other tech giants. A third chart showed AI capex mirroring the tech spending of the 1999-2000 tech bubble.
The comparison to the dot-com bubble is particularly interesting. Back then, companies with little to no revenue were valued at astronomical multiples based on the promise of the internet. Are we seeing a similar dynamic with AI, where hype is outpacing actual earnings? It's a valid question, especially when considering the valuations of companies like Palantir, which, despite its growth, still faces questions about its long-term profitability (a point often glossed over in bullish analyses).
Burry's 13F filing also reveals some interesting moves beyond the tech shorts. Scion added 50,000 shares of Lululemon, opened a 125,000 share position in Molina Healthcare, and a 480,000 share position in SLM Corp. He also purchased 2.5 million calls on Halliburton and six million calls on Pfizer. These moves suggest a broader investment strategy that's not solely focused on betting against tech. It's a diversification play, perhaps hedging against the potential downside of his bearish tech bets. The firm also closed positions in Estee Lauder, Regeneron Pharmaceuticals, MercadoLibre, and UnitedHealth Group.
Palantir and Nvidia: A Closer Look
Why Palantir and Nvidia specifically? Palantir, despite securing some high-profile government contracts, still struggles to convince some investors of its commercial viability at its current valuation. Its reliance on government contracts makes it vulnerable to political shifts and budget cuts. The stock is trading at all-time highs, which, from Burry’s perspective, may represent an overvaluation ripe for correction. As reported by Benzinga, Burry is particularly bearish on Palantir, holding 5 million puts against the company. Michael Burry Is Super-Bearish On Palantir — With 5 Million Puts - Palantir Technologies (NASDAQ:PLTR)
Nvidia, on the other hand, is a key player in the AI boom, providing the GPUs that power many AI applications. However, its stock price has surged dramatically, pricing in years of future growth. Burry's bet against Nvidia could be a play on the sustainability of this growth, especially as competition in the GPU market intensifies (with AMD and even Intel making strides). Or, perhaps he sees Nvidia's dependence on a few key customers (like the hyperscalers) as a point of vulnerability.
I've looked at hundreds of these filings, and this particular combination of short positions, coupled with the specific long positions, suggests a carefully considered strategy, not just a knee-jerk reaction to market hype.
The critical question is: what metrics is Burry using that are flashing warning signs? Is it the price-to-sales ratio, the projected growth rate relative to current earnings, or something else entirely? Details on his specific valuation models remain scarce, but the impact is clear: he's putting a significant amount of capital behind his convictions.
Another question that comes to mind: with interest rates likely to remain higher for longer, how will this impact growth stocks like Nvidia and Palantir, which rely on future earnings projections to justify their high valuations?
The Bearish Case is Compelling, But...
Burry's track record speaks for itself. However, even the best investors are wrong sometimes. The market can remain irrational longer than you can remain solvent, as the saying goes. The AI narrative is powerful, and it's possible that Palantir and Nvidia will continue to defy gravity, at least for a while. The question isn't whether Burry could be right, but whether the timing is right. A great thesis with poor timing is still a losing trade.
One thing is certain: Burry's bets are a wake-up call. They force investors to re-examine their assumptions and ask tough questions about the valuations of high-flying tech stocks. Whether he's ultimately proven right or wrong, his analysis is a valuable contribution to the market discourse.
Is This the Beginning of the End?
Burry's bet is a calculated risk, based on his analysis of market trends and company valuations. It's a reminder that even in the age of AI, fundamental principles still matter. And right now, those principles are telling Burry that the hype has gone too far.
