Michael Burry Bets $1.1 Billion Against AI Giants Nvidia and Palantir, Warning of a Bubble

The ‘Big Short’ Investor Places Massive Wager Against AI Market Leaders

One of the most closely watched investors in the world, Michael Burry—the hedge fund manager famously chronicled in The Big Short—has disclosed a massive short position targeting two of the most prominent stocks driving the current artificial intelligence boom: Nvidia and Palantir Technologies.

Regulatory filings from Burry’s firm, Scion Asset Management, reveal the fund holds put options with a notional value of approximately $1.1 billion against these two technology heavyweights. This aggressive bearish maneuver signals Burry’s conviction that the current valuation of AI-focused companies has entered unsustainable, “bubble territory.”

This move, disclosed via the mandatory 13F filing for institutional investment managers, immediately sent ripples through the market, forcing investors to re-evaluate the sustainability of the recent, explosive growth in the tech sector.

The Mechanics of the Bearish Bet

Burry’s strategy is executed through the purchase of put options. A put option gives the holder the right, but not the obligation, to sell a stock at a specified price (the strike price) on or before a certain date. Burry profits significantly if the stock price of the underlying asset—in this case, Nvidia and Palantir—falls below the strike price before the option expires.

While the $1.1 billion figure represents the notional value (the total value of the underlying shares controlled by the options), the actual cash premium paid for these options is significantly lower. However, the size of the bet is staggering, representing a substantial portion of Scion Asset Management’s publicly disclosed portfolio.

Targeting the Core of the AI Boom

Burry’s focus on Nvidia and Palantir is highly strategic, as they are widely considered bellwethers for the AI industry’s valuation:

• Nvidia (NVDA): The undisputed leader in the manufacturing of high-performance Graphics Processing Units (GPUs), which are essential for training and running complex AI models. Nvidia’s stock has experienced exponential growth, driven by unprecedented demand for its hardware. Its valuation is often cited as a key indicator of the market’s enthusiasm for AI.
• Palantir Technologies (PLTR): A data analytics and software company that specializes in government and corporate AI solutions. Palantir has aggressively marketed its AI platforms, leading to significant stock appreciation and high growth expectations.

By targeting these specific entities, Burry is not just betting against the general tech sector; he is making a direct statement about the overvaluation of the core infrastructure and software providers powering the AI revolution.

Why Burry Sees “Bubble Territory”

Michael Burry’s reputation stems from his successful, highly contrarian short bet against the U.S. housing market leading up to the 2008 financial crisis. His current warning about the AI sector draws parallels to previous speculative manias.

Burry’s analysis typically focuses on the disconnect between fundamental value (earnings, cash flow, tangible assets) and market capitalization (stock price). In the context of the AI boom, the argument for a bubble rests on several factors:

1. Future Earnings Discounting: Current stock prices for companies like Nvidia are heavily reliant on projecting decades of flawless, exponential growth in AI adoption, discounting future earnings at an extremely low rate.
2. Historical Precedent: The rapid, sector-wide enthusiasm mirrors the Dot-Com Bubble of the late 1990s, where high-growth technology companies were valued based on potential rather than proven profitability.
3. Competition and Commoditization: While Nvidia currently dominates, the long-term threat of competition from custom chips (ASICs) developed by major tech consumers (like Google and Amazon) and the potential commoditization of AI hardware could eventually erode profit margins.

“The sheer velocity of the gains in the AI sector, coupled with valuations that far outstrip current revenue streams, suggests a speculative frenzy rather than rational investment,” financial analysts often note when discussing Burry’s position.

Market Reaction and Investor Implications

Burry’s disclosures are often treated as a significant market signal, primarily due to his track record. However, his bets are not always immediately successful, and he has closed out several short positions prematurely in the past.

The Contrarian View

While Burry is bearish, many institutional investors remain bullish on AI, arguing that the technological shift is fundamentally different from past bubbles. Proponents of the AI rally assert that:

• Utility is Real: Unlike the dot-com era, the core technology (AI) is already generating massive productivity gains and revenue for early adopters.
• Supply Constraint: Nvidia’s dominance is currently protected by the complexity and difficulty of manufacturing advanced chips, creating a temporary monopoly.
• Capital Investment: Major corporations are committing billions to AI infrastructure, ensuring sustained demand for key components.

What This Means for Investors

For the average investor, Burry’s move serves as a critical reminder of risk management in highly concentrated sectors. It underscores the importance of distinguishing between a genuine technological revolution and speculative excess.

• Due Diligence: Investors should scrutinize the price-to-earnings (P/E) ratios and growth projections of AI stocks, ensuring they align with realistic expectations.
• Volatility Warning: High-profile short bets often increase volatility in the targeted stocks as traders attempt to front-run or counter the position.

Key Takeaways from Scion’s Filing

Scion Asset Management’s 13F filing provides a clear snapshot of Burry’s current market conviction:

• The Target: The short bet is focused squarely on the AI infrastructure leaders: Nvidia and Palantir.
• The Size: The notional value of the put options is approximately $1.1 billion, indicating a high-conviction, large-scale position.
• The Thesis: Burry believes the AI sector is experiencing a speculative bubble, similar to the housing crisis he successfully predicted.
• The Mechanism: The bet is structured using put options, allowing Scion to profit from a significant decline in the stock prices of the targeted companies.

Conclusion: A Test of Market Conviction

Michael Burry’s $1.1 billion short bet against the darlings of the AI market—Nvidia and Palantir—is more than just a trade; it is a high-profile challenge to the dominant market narrative. His action forces a necessary debate: Is the current AI rally a sustainable, paradigm-shifting growth cycle, or is it a speculative bubble inflated by euphoria and cheap capital?

While Burry’s timing is always uncertain, his track record demands attention. This massive short position will likely serve as a psychological ceiling for the targeted stocks, intensifying scrutiny on every earnings report and technological development in the coming quarters. Investors must now weigh the immense potential of AI against the historical warnings of speculative excess.

What’s Next

Market participants will be closely watching the performance of NVDA and PLTR throughout the year. The outcome of this high-stakes wager will not only determine the profitability of Scion Asset Management but could also validate or invalidate the long-term bullish outlook for the entire AI sector. Further regulatory filings will reveal if Burry increases, decreases, or closes the position in the subsequent quarters of 2025.