When the big shot legend speaks, Wall Street listen. At this time, Michael Burry is betting against the darling of the artificial intelligence boom, Nvidia and Palantir. Through his Scion Asset Management, Burry reportedly placed put options of worth around $912 million on Palantir and $187 million on Nvidia
After this news that Michael Burry is betting against Nvidia and Palantir. The stock price of both Companies dropped massively.
Palantir’s stock tumbled nearly 8% in just a single day and 11% over a week, and Nvidia, the poster boy of the artificial intelligence revolution, saw a sharp slip of 3% initially and ended the week with a 7.1% Decline.
Together, these two companies lost an estimated 685 billion dollars in market value in just 3 days. The sell-off didn’t stop just at these two companies; other AI-linked stocks also started falling as investors began questioning whether valuations of these AI companies are running far ahead of the fundamentals.
The Reason why Burry is against the AI Boom
While Investors are chasing the trend, Burry is sounding alarming, which is somewhat familiar to his 2008 prediction that made him famous. His thesis is simple: that the AI Valuations have run far ahead of the fundamentals
Palantir’s price-to-sales ratio is above 140x, a level that even the growth investors find difficult to justify
Nvidia, though a genuine profit machine, is now trading at earnings multiples historically reserved for companies in their infancy, not a trillion-dollar behemoth.
The idea is that the AI may have gone too far, and some of the enthusiasm is outpacing fundamentals. Michael Burry seems to think we might be seeing a bubble in AI-related stocks. Given his track record for spotting anomalies. Burry might believe the market is overextended especially in names that have had a very strong recent run.
Not Everyone is Taking This Criticism Quietly
Alex Karp, the CEO of Palantir, lashed out at Burry’s statement. Alex Said, “Our company builds real AI System that serves real government and real enterprises. When his bet fails, I will be dancing around”. This is what Karp told Business Standard. Nvidia has declined to comment publicly, though analysts note that the company’s fundamentals remain strong, driven by insatiable demand for GPUs and AI data centre chips.Â
So Michael Barry is making a big explicit bet that the current valuation in leading AI-related stocks, especially Palantir and Nvidia, is too high and that a pullback is likely to happen, whether he is right or the time works out in another matter, but his move is notable contrarain stance In the market where AI is broadly seen as the next big growth wave.
