Key Takeaways
- “The Big Short” investor Michael Burry’s investment firm Scion owned put options on Nvidia and Palantir at the end of the third quarter, new filings show.
- That means Burry was at one point betting, in either the short-term or long-term, that the companies’ stocks would decline.
- Burry has posted messages on social media in the last week about his feelings on the AI industry, though their meaning is unclear.
Michael Burry, an investor made famous by his bets against the U.S. housing market before the 2008-2009 crash and ensuing Great Recession, appears to have a new short target: the artificial intelligence industry.
In its quarterly 13-F filing released this week, Burry’s Scion Asset Management revealed that it has acquired put options, which secure the right to sell an asset at a given price by a certain date, on a pair of AI heavyweights: Nvidia (NVDA) and Palantir (PLTR).
Why This Matters For You
Correctly identifying a previous bubble does not make someone like Burry more likely to call a future bubble, but he wouldn’t be alone in thinking there is one. An AI “bubble” popping would have sizable impacts across the stock market, and would likely impact your retirement accounts and the broader economy.
What Bets Burry is Making, and What He’s Said About AI
According to the filing, Scion now owns the right to sell 5 million Palantir shares and 1 million Nvidia shares, which at the time of filing had a combined value of just shy of $1.1 billion. The filing doesn’t disclose the end date for the put options, so it’s unclear whether Burry is making a long-term or short-term bet that the stocks will decline or the puts are part of a more complex set of positions. The filings simply show an investment firm’s positions held at the end of a quarter, and these may have changed since the third quarter ended in September.
Palantir CEO Alex Karp responded to the news in a Tuesday interview with CNBC, calling the idea of shorting Palantir and Nvidia “bats— crazy,” as they are two of the only companies “making all the money” in the AI sector. Karp said those engaging in shorts of Palantir, like Burry, may be engaging in “market manipulation.”
Posts from Burry’s X account have offered what seem to be conflicting messages in the last week about how he feels about the AI sector. Last week, Burry posted an image of his character in 2015’s “The Big Short,” along with the message: “Sometimes, we see bubbles. Sometimes, there is something to do about it. Sometimes, the only winning move is not to play.”
On Monday, Burry posted a trio of charts showing that cloud growth may have been higher for tech giants Amazon (AMZN), Alphabet (GOOGL), and Microsoft (MSFT) before the AI frenzy began, and highlighting the dot-com era like spending and the circular nature of the current world of AI financing.
After reports emerged around Scion’s 13F on Tuesday morning, Burry posted, “Fake news! I am not 5’6” (not that there is anything wrong with that),” alongside a picture of himself with Christian Bale, who portrayed him in “The Big Short.” The text of the post could suggest that Burry is implying he is not “short,” and in the same post he said there were “none more fake” than “journalists reporting on 13Fs.” (Scion Asset Management didn’t respond to a request for comment asking for clarity on the put options and Burry’s posts.)
Why Some Investors Are Growing Concerned About an AI Bubble
Aside from whether Burry may be betting on the AI trade cooling off, other market watchers have been identifying a range of signs that the market may be in a bubble comparable to the dot-com boom and bust around the turn of the century.
Some have cited the increasingly circular financing in the AI world, with companies like Nvidia acting as an investor, supplier, and customer of companies like ChatGPT-maker OpenAI and others. Others have noted the tremendously high costs of building and running the data centers serving as the backbone of the AI industry, and questioned whether tech giants can create enough revenue to make back their massive infrastructure investments.