Michael Burry Bets Big Against AI: Why ‘The Big Short’ Investor Is Shorting Nvidia and AMD

The Contrarian Strikes Again: Burry’s Billion-Dollar Short Against AI Leaders

Michael Burry, the hedge fund manager immortalized in the book and film The Big Short for predicting the 2008 housing collapse, has once again positioned himself dramatically against the prevailing Wall Street consensus. According to recent regulatory filings from his firm, Scion Asset Management, Burry has taken a massive short position against two of the most critical companies driving the current artificial intelligence (AI) boom: Nvidia (NVDA) and Advanced Micro Devices (AMD).

This move, often characterized in financial media as a “billion-dollar bet” (referring to the notional value of the underlying shares represented by the options), signals Burry’s deep skepticism regarding the sustainability and valuation of the current AI-driven tech rally. For investors, the question is immediate and pressing: Does the man who saw the last major bubble forming know something the rest of the market is missing?

Anatomy of the Short: Targeting the AI Infrastructure

Burry’s short positions are typically executed through the purchase of put options. A put option grants the holder the right, but not the obligation, to sell a stock at a specified price (the strike price) before a certain date. This strategy allows Burry to profit handsomely if the stock price declines significantly.

While the exact timing and strike prices of the options are subject to change, the disclosure via the mandatory 13F filing confirms Scion Asset Management’s bearish stance on the foundational technology powering the AI revolution.

Why Nvidia and AMD?

Nvidia and AMD are not just participants in the AI boom; they are its architects. Their specialized Graphics Processing Units (GPUs) are the essential hardware required for training and running complex large language models (LLMs) and other generative AI applications. This has led to unprecedented demand and soaring valuations:

• Nvidia (NVDA): Dominates the high-end AI chip market, commanding an estimated 90% market share in data center GPUs. Its valuation has exploded, reflecting expectations of continuous, exponential growth in AI infrastructure spending.
• Advanced Micro Devices (AMD): While a smaller player in the high-end AI space, AMD is aggressively challenging Nvidia with its own line of AI accelerators, positioning itself as a key competitor in the burgeoning data center market.

Burry’s decision to short these two specific entities suggests he believes the market has priced in a perfect, uninterrupted future for AI adoption—a scenario he likely views as overly optimistic or mathematically unsustainable.

The Precedent: Burry’s History of Contrarian Success

Michael Burry’s reputation is built on his ability to identify systemic risks that the broader market ignores. His most famous call involved the U.S. housing market bubble in the mid-2000s.

In the early 2000s, while most of Wall Street celebrated the booming housing market, Burry meticulously analyzed mortgage data and recognized the inherent instability of subprime lending. He began shorting the market by purchasing credit default swaps (CDS) against bundles of subprime mortgages—a move that was initially ridiculed by his investors but ultimately proved prescient.

“The market is not efficient. It’s not even intelligent. It’s just a crowd,” Burry has often implied through his actions, suggesting that when everyone agrees on a single investment narrative, the risk of a sharp correction increases dramatically.

This historical context is crucial: Burry is not merely betting against two companies; he is betting against the underlying economic assumption that the current rate of technological adoption and profit growth can justify the current valuations.

Analyzing the AI Bubble Thesis: What Risks is Burry Seeing?

While the AI revolution is undeniably real, Burry’s short position highlights several potential vulnerabilities in the market that could lead to a significant correction in the valuations of companies like Nvidia and AMD.

1. Extreme Valuation Metrics

Both Nvidia and AMD trade at extremely high price-to-earnings (P/E) ratios, reflecting massive future growth expectations. Burry may be arguing that these valuations leave no room for error. Any slowdown in data center spending, increased competition, or delay in AI monetization could trigger a severe re-rating of the stock.

2. Competition and Commoditization

While Nvidia currently dominates, the landscape is rapidly evolving. Major customers, including Google (Alphabet), Amazon (AWS), and Microsoft, are developing their own custom AI chips (ASICs) to reduce reliance on Nvidia and control costs. This internal development poses a long-term threat to the GPU giants, potentially leading to:

• Price compression on high-end chips.
• Market share erosion as customers shift to proprietary hardware.

3. The Hype Cycle and Capital Expenditure Sustainability

There is a risk that the current massive capital expenditure (CapEx) on AI infrastructure is front-loaded and unsustainable. Companies are rushing to build out data centers, but the actual return on investment (ROI) from these massive AI deployments is still developing. If the monetization of AI applications lags behind the infrastructure build-out, demand for new chips could temporarily plateau, leading to an inventory glut and a drop in revenue growth.

Implications for Retail and Institutional Investors

Burry’s short position serves as a powerful cautionary signal, even for investors who remain bullish on AI technology. It forces a critical examination of risk.

Key Considerations for Investors:

• Risk Management: Burry’s move underscores the importance of portfolio diversification. Even if the long-term AI trend is positive, short-term volatility driven by valuation concerns is high.
• Focus on Fundamentals: Investors should scrutinize whether the projected earnings growth for NVDA and AMD is achievable, or if it relies on an unrealistic continuation of current demand levels.
• Market Sentiment: Burry’s actions often move the needle, especially among institutional investors who respect his track record. His short could increase market nervousness and contribute to downward pressure if broader economic indicators weaken.

It is important to remember that Burry’s strategy is highly aggressive and carries significant risk. While he has been right before, he has also been early, and sometimes wrong, on other calls. The market can remain irrational longer than many short sellers can remain solvent.

Conclusion: A Test of the AI Narrative

Michael Burry’s short against Nvidia and AMD is more than just a trade; it is a direct challenge to the dominant financial narrative of 2025. He is betting that the exuberance surrounding generative AI has created a classic bubble, where valuations have detached from realistic future cash flows.

For the AI titans, this is a test of resilience. If the companies can continue to deliver exponential revenue growth and successfully fend off competition from internal chip development, Burry’s bet will fail. If, however, the growth rate moderates, or if the market begins to focus on the inherent cyclicality of semiconductor demand, Burry may once again prove to be the ultimate contrarian prophet.

Investors should view this development not as a definitive forecast, but as a critical reminder to apply rigorous skepticism to the most crowded and celebrated trades on Wall Street.