The guy who predicted the 2008 housing crash just dropped a bomb on tech stocks. Michael Burry — yes, that Michael Burry from “The Big Short” — revealed he’s purchased over $1 billion worth of put options against AI darlings Nvidia and Palantir. Markets didn’t take it well. Nvidia dropped 5% from its Monday peak, Palantir tanked 8.5%, and the rest of Big Tech got dragged down too. Is this the dot-com bubble all over again, or is Burry finally wrong?
Who Is Michael Burry and Why Does This Matter?
If you haven’t seen “The Big Short,” here’s the TL;DR: Michael Burry runs Scion Asset Management and famously bet against the housing market before it imploded in 2007. He made a fortune while everyone else lost theirs. So when Burry bets big against something, people listen.
This time, he’s not targeting subprime mortgages. He’s betting against AI stocks — specifically $912 million in put options against Palantir and $186 million against Nvidia. That’s not pocket change, even for a hedge fund legend.
What’s Burry Seeing That Others Aren’t?
Burry’s been quiet for years, but he came back swinging with some pointed observations on X (formerly Twitter). His main concerns?
Slowing Cloud Demand vs. Skyrocketing AI Spending
Cloud computing growth is cooling off, but AI companies are burning cash like it’s going out of style. Capital expenditure is hitting record highs while actual demand isn’t keeping pace. Sound familiar? It should — that’s classic bubble behaviour.
Tech Stocks Are Dangerously Interconnected
Burry posted a chart showing how intertwined major tech stocks have become. His sarcastic caption? “These aren’t the charts you are looking for. You can go about your business.” Translation: when one falls, they all fall.
Concentration Risk Is at a Century High
The S&P 500’s top holdings are more concentrated than they’ve been in over 100 years. Most of that weight? AI and Big Tech. If the AI narrative cracks, the entire market could take a hit.
How Did Tech Stocks React?
Nvidia dropped 5% from Monday’s all-time high. Palantir plunged 8.5% before recovering slightly. The Magnificent Seven (Apple, Microsoft, Google, Amazon, Meta, Tesla, Nvidia) all got dragged down, with a European tracker fund falling 8.5%.
Palantir’s CEO Alex Karp fired back on CNBC, calling Burry’s bet “bat-shit crazy.” His take? “Those two companies he’s shorting are the ones making all the money.” Fair point — but Burry’s made a career out of being right when everyone else thinks he’s crazy. His 2008 housing bet earned him $100 million personally and $700 million for investors.
Is This the AI Bubble Popping?
Here’s the uncomfortable truth: we don’t know yet. AI has driven markets to record highs, and investor faith in a “fourth industrial revolution” is sky-high. But Burry’s betting that valuations have gotten ahead of reality — that companies are spending more on AI infrastructure than they can justify with actual revenue. Could he be wrong? Absolutely. But his track record means it’s worth watching.
What Should Investors Do Now?
Don’t panic, but don’t ignore this either. If you’re heavily exposed to AI stocks, consider diversifying — Burry’s hedging with old-economy plays like Pfizer and Halliburton. Watch for slowing AI revenue growth or weakening cloud demand. And remember: even if Burry’s right, timing matters. The dot-com bubble took years to fully deflate.
The Bottom Line
Michael Burry’s $1.1 billion bet against AI stocks is a warning shot. Whether he’s right or early, it’s a reminder that valuations can’t outpace reality forever. Stay diversified, watch for weakening AI fundamentals, and don’t bet the farm on hype.
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FAQ
Q1: Why is Michael Burry betting against Nvidia and Palantir specifically?
A: Burry likely sees these two as the most overvalued relative to fundamentals. Palantir trades at an extremely high price-to-earnings ratio, and Nvidia’s valuation has skyrocketed on AI hype. Both are poster children for the AI boom — making them prime targets if he thinks the sector is overheated.
Q2: Does this mean AI stocks will definitely crash?
A: Not necessarily. Burry’s bet is his opinion, not a guarantee. He could be early, wrong, or right but poorly timed. AI could still deliver on its promises and justify current valuations — but his track record means this is worth watching closely.
Q3: Should I sell all my tech stocks now?
A: That depends on your risk tolerance and portfolio diversification. If you’re heavily concentrated in AI and Big Tech, consider rebalancing. But don’t make emotional decisions based on one person’s trade — even if that person is Michael Burry.
Q4: What happened during the dot-com bubble that Burry’s referencing?
A: In the late 1990s, internet stocks soared on hype before crashing spectacularly in 2000-2002. Companies with no profits or viable business models were valued in the billions. Sound familiar? That’s the parallel Burry’s drawing — lots of spending, uncertain returns, and sky-high valuations.
Q5: How can I track if Burry’s thesis is playing out?
A: Watch for slowing revenue growth in AI companies, declining cloud demand, and rising skepticism from analysts. If capital expenditure stays high while revenue disappoints, that supports Burry’s case. Also, keep an eye on tech stock concentration in major indexes like the S&P 500.
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Effective Date: 15th July 2025
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