Michael Burry's Latest Bet: Shorting the AI Boom With Historical Lessons as His Compass

The Big Short’s Newest Gamble Takes Aim at Nvidia and Palantir

Legendary contrarian Michael Burry is making headlines once again. Recent 13F filings reveal that Scion Asset Management has taken substantial put option positions totaling approximately $1.1 billion against two of Wall Street’s most celebrated AI stocks: Nvidia and Palantir Technologies.

The positions are striking in their scale—roughly $912.1 million in notional value against Palantir and $186.6 million against Nvidia. For those unfamiliar with put options, these contracts allow investors to profit if stock prices decline. What makes Burry’s move particularly noteworthy is the timing: placing such a significant bet against the industry’s brightest stars at the height of the AI enthusiasm cycle.

Why Burry Sees Danger Where Others See Opportunity

Michael Burry rose to prominence by identifying flaws in consensus narratives. Before the 2007 financial crisis, he questioned the stability of mortgage-backed securities held by major financial institutions, ultimately purchasing credit-default swaps that paid out billions when the market collapsed. His $725 million profit from that bet inspired the 2015 film The Big Short.

Now, he’s applying similar reasoning to the artificial intelligence space. While few dispute that Nvidia dominates GPU manufacturing and Palantir’s Gotham platform has no direct competitor, Burry sees a pattern repeating itself.

The Technology Bubble Playbook: A Historical Warning

History repeatedly shows that revolutionary technologies attract irrational investment cycles. Roughly three decades ago, the internet’s emergence sent valuations of dot-com companies soaring to unprecedented levels—many boasting price-to-sales ratios between 30 and 40. When reality failed to match expectations, the bubble burst spectacularly.

Since then, similar cycles have emerged with genome sequencing, nanotechnology, 3D printing, and blockchain technology. Each arrived with transformative promises; each disappointed investors who bought at peak enthusiasm.

The artificial intelligence revolution may follow the same trajectory. The question isn’t whether AI will be transformative, but rather how quickly adoption and optimization will actually occur—and more importantly, whether current valuations can sustain themselves during the inevitable correction.

Valuation Metrics Flash Red Signals

The most compelling evidence supporting Burry’s bearish thesis lies in valuation multiples. Nvidia recently surpassed a price-to-sales ratio of 30—the historical ceiling for most megacap companies during the dot-com era. Palantir has climbed even higher, reaching a P/S ratio of 152.

These multiples suggest that current market prices have already priced in decades of perfect execution and growth. Should either company experience even modest disappointment, the margin for error has virtually disappeared. Short-term Fed policy and strong earnings growth may support these valuations for quarters ahead, but history indicates such extremes rarely persist indefinitely.

What This Means for Investors

Michael Burry’s short positions may prove frustratingly early. Market momentum, favorable monetary conditions, and genuine business strength could propel Nvidia and Palantir higher before gravity reasserts itself. Yet the statistical evidence suggests his contrarian wager aligns with longer-term probabilities.

The timing remains unknowable—bubbles can inflate far longer than skeptics expect—but the direction of eventual correction appears supported by decades of market precedent.