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Generated Title: Burry's AI Bets: Genius Move or Just Bearish Noise? A Data Dive
Michael Burry, the man who made a killing betting against the housing market before the 2008 crash, is at it again. This time, he's setting his sights on the AI darlings of Wall Street: Nvidia (NVDA) and Palantir (PLTR). His hedge fund, Scion Asset Management, recently disclosed put options on a cool 5 million Palantir shares and 1 million Nvidia shares. That's roughly $1.1 billion riding on these stocks heading south. The question is, is this another stroke of Burry's genius, or is he just a contrarian making noise?
Digging Into Burry's Bearish Signals
Let's break down the numbers. Burry's put options represent about 80% of Scion's $1.38 billion portfolio. That’s not just a hedge; it's a statement. A big one. He's not just dipping a toe in the water; he's diving headfirst into the bearish pool. And he’s not alone in his skepticism. Warren Buffett’s favorite valuation metric, the ratio of total US stock market capitalization to GDP, has hit a record high of 233.7%. (The previous high was during the dot-com bubble.) This, according to Buffett’s own words, means "you're playing with fire." Michael Burry, Warren Buffett Flash Red Warnings for November as Markets Overheat
Now, about those target prices. Nvidia currently holds a "Strong Buy" rating with an average price target of $237.86, implying a 15% upside. Palantir, on the other hand, carries a "Hold" consensus, and its average price target of $155.44 suggests a downside of over 25%. So, analysts are already a bit wary of Palantir. But Burry’s bet goes beyond a simple analyst downgrade. He's betting against the entire AI narrative that has propelled these stocks to dizzying heights.
The timing of Burry’s move is interesting. The filing came shortly after Palantir reported 63% revenue growth to $1.18 billion for Q3. Solid numbers, right? But the stock still took a hit. Why? Because, as the report notes, Palantir's high valuation meant even those solid numbers weren’t enough to satisfy expectations. This highlights a crucial point: it's not just about the numbers; it's about the expectations baked into the stock price.
The AI Hype: A Bubble in the Making?
Burry's strategy, according to one analyst, is reminiscent of his pre-2008 moves. He's executing aggressive short positions, with contracts stretching to 2026 and 2027. This isn't a short-term trade; it's a long-term bearish outlook, suggesting he believes a major market correction is on the horizon.
But let's be clear: betting against AI is not like betting against subprime mortgages. The AI revolution is real. The question is whether the current valuations of companies like Nvidia and Palantir are justified. Are they priced for perfection? And what happens if growth slows, or if market sentiment shifts?
I've looked at hundreds of these filings, and I find the size of Burry's bet particularly telling. He’s not just hedging his portfolio; he's making a concentrated wager. This suggests a high degree of conviction. But conviction doesn’t always translate to profit.
One thing that strikes me is the speed with which this 13F filing was released – more than a week earlier than usual. Is Burry trying to send a deliberate signal to the market, or is it simply a coincidence? It's hard to say, but the timing is certainly noteworthy.
The Market's Emperor Has No Clothes
Burry's bet is a stark reminder that even the most promising technologies can be subject to irrational exuberance. The market, fueled by AI mania, may be ignoring fundamental risks. Whether Burry is right or wrong remains to be seen, but his contrarian stance is a necessary dose of reality in a market that seems increasingly divorced from reality.