According to Business Insider, Michael Burry’s Scion Asset Management placed massive bearish bets against AI leaders Nvidia and Palantir last quarter. The firm purchased put options on 1 million Nvidia shares worth $187 million and 5 million Palantir shares worth $912 million. Burry returned to X after a two-year hiatus with cryptic warnings about AI bubbles, comparing current market conditions to the dot-com crash. Following the revelation of his positions, Nvidia fell 4% and Palantir dropped 8% on Tuesday. The bets dominated Scion’s portfolio, which contained only eight total holdings worth just $68 million in direct positions.
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Burry’s Bubble Warning
Here’s the thing about Michael Burry – he doesn’t just make trades, he creates narratives. His return to social media after two years away was pure theater. That “WarGames” reference about the only winning move being not to play? That’s not just a movie quote – it’s a statement about how he views today’s AI-fueled market. He’s basically saying the entire game is rigged against investors right now.
And his evidence is pretty compelling. The charts he shared show cloud growth slowing at Amazon and Alphabet, tech capital expenditures spiking like they did before previous crashes, and this circular dealmaking between Nvidia, OpenAI, and Microsoft. It’s the kind of interconnected excess that should make any seasoned investor nervous.
History Repeating?
Now, Burry’s track record gives his warnings extra weight. This is the guy who saw the housing bubble when everyone else thought prices would keep rising forever. His reference to Cassandra – the prophet nobody believed – feels particularly pointed. He’s positioning himself as the voice in the wilderness again, warning about another bubble that everyone else is ignoring.
But here’s the question: is this time actually different? The AI revolution seems real enough – these companies are actually generating revenue, unlike many dot-com era startups. Palantir‘s CEO Alex Karp fired back asking why Burry would short companies that are “making all the money.” He’s got a point. These aren’t pets.com – they’re profitable businesses with real products.
The Risk-Reward
The danger for Burry, as one analyst noted, is getting “run over by momentum and liquidity-fueled markets.” If Nvidia and Palantir keep delivering blowout earnings and the Fed keeps cutting rates, these bets could get very expensive very quickly. We’re talking about $1.1 billion in notional value here – this isn’t some small speculative position.
Yet the counter-argument is equally compelling. Look at the numbers – Nvidia hitting a $5 trillion valuation, Palantir worth nearly $500 billion. That’s more than Exxon Mobil or Mastercard. When expectations get this high, even minor disappointments can trigger massive selloffs. And with margin debt at all-time highs and retail investors piling in, the tinder is definitely soaked in gasoline, as one fund manager put it.
What Comes Next
So where does this leave us? Burry’s making the classic contrarian bet – going against the crowd when sentiment seems excessively bullish. His timing might be early – he’s been wrong before on timing – but his thesis about excess isn’t crazy. The circular deals, the massive infrastructure spending, the slowing cloud growth – these are real warning signs.
The market’s reaction tells you everything. Both stocks dropped immediately when his positions were revealed. That shows how much influence his voice still carries. Whether he’s right or wrong this time, one thing’s certain: when Michael Burry speaks, people listen. And right now, he’s screaming that the AI emperor has no clothes.
