Michael Burry, the hedge-fund manager famed for predicting the 2008 financial crisis, has disclosed significant put option positions against Nvidia and another AI-heavy stock, Palantir Technologies Inc.. According to regulatory filings and media coverage:
- His firm, Scion Asset Management, holds about 1 million share equivalent puts on Nvidia (~US$187 million) and 5 million share equivalent puts on Palantir (~US$912 million) — a combined notional of over US$1 billion.
- These positions represent a large portion of Scion’s portfolio (~80% according to filings) suggesting a strong bearish stance. MarketWatch
- Burry has publicly warned of an “AI bubble” and compared current tech/AI valuations to the dot-com era.
Why Burry Is Making This Move
Overvaluation Concerns
- Nvidia recently reached a market cap above US$5 trillion, and Palantir’s valuation has also soared — Burry sees these valuations as detached from fundamentals.
- His commentary highlights signs of froth: e.g., rapid capex growth in tech/AI, and circular deals that may amplify risk rather than genuine demand.
Tactical Shift
- Rather than being simply long-biased, Burry appears to be repositioning for a market correction or shift in sentiment — especially in the AI sector where investor optimism has been extreme.
- Owning put options (rather than derivative short sales) gives a defined risk (premium paid) but potentially large payoff if his thesis plays out.
Implications for Market & Investors
For Nvidia & AI Stocks
- Burry’s move doesn’t guarantee a crash, but it serves as a high-visibility warning signal. Investors may become more cautious about lofty growth assumptions.
- If demand for AI hardware/solutions slows, or regulatory/competitive headwinds rise, the risk to stocks like Nvidia could rise.
For Retail & Institutional Investors
- This is not a recommendation to sell Nvidia immediately — many institutions remain bullish — but it prompts a review of margin of safety, valuation risk and time horizon.
- Those invested in AI stocks may consider hedging or reviewing exposure given the possibility that sentiment could reverse.
For the Broader Fintech/Tech Ecosystem
- The episode underscores how even widely-celebrated sectors (AI, semis) carry cyclical and sentiment risk.
- It may embolden more contrarian bets or hedges against momentum-driven sectors.
What to Watch Next
- Nvidia’s upcoming earnings: Can growth in data center, AI hardware sustain the current valuation? Any signs of margin compression or slower demand will matter.
- Market sentiment & flows into AI theme: If inflows slow or sentiment turns, stocks may underperform despite strong fundamentals.
- Regulatory/Geopolitical risks: For Nvidia especially, export controls, supply chain disruptions or global macro shocks could become trigger events.
- Time and expiry of the put options: The effectiveness of Burry’s position depends not just on price drop but on timing — if he’s too early, the cost may erode premium value.
