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Julian Vance: Burry's AI Bubble Bets - Genius or Just Noise?
Michael Burry, the man who called the 2008 housing crisis, is making waves again. This time, he's betting against the AI boom, specifically with put options on Nvidia and Palantir. The immediate reaction is predictable: Is he a visionary, or is he missing the boat? Let's dissect the numbers.
The Bear Case: Overvalued Hype Machines
Burry's core thesis, as far as I can tell, hinges on the idea that AI valuations are detached from reality. He's not alone. The Nasdaq took an immediate hit of 1.5% after his positions were revealed. Palantir, despite beating revenue expectations, saw its stock price plummet by as much as 16%. Nvidia, the darling of the AI chip market, was down over 2%. These aren’t exactly signs of unshakeable confidence.
Burry himself has been dropping hints on X (formerly Twitter), warning about bubbles and quoting graphics highlighting the concentration of the AI boom in Nvidia and OpenAI. One chart he posted showed parallels between current tech capital expenditure growth and the dot-com era. It's a classic "this looks familiar" argument, and those arguments can be dangerous if you don’t look closely at the underlying reasons.
The problem, as I see it, isn't just that valuations are high (they are), but that future growth is already priced in. Nvidia's stock is up roughly 46% year-to-date. Palantir is up a staggering 157%. The market expects continued exponential growth from these companies. Can they deliver? That’s the billion-dollar question – or rather, the billion-dollar put question, for Burry.
The Bull Case: Are We Really That Smart?
Palantir CEO Alex Karp didn't mince words in his response, calling Burry's move "bats--t crazy." Karp's argument is straightforward: Nvidia and Palantir are actually making money in the AI space. He sees Burry essentially shorting the entire AI revolution.
And he might have a point. Nvidia dominates the GPU market, the picks and shovels of this AI gold rush. Palantir's data analytics platform is being used in everything from defense to healthcare. These aren't just vaporware companies chasing a trend; they have tangible products and real customers.
The counter-argument to Karp is that those profits are already factored into the stock price and then some. It's not enough to be profitable; you have to be more profitable than the market expects. Deutsche Bank's Jim Reid pointed out that Palantir's stock drop came from a lack of visibility into 2026, not from bad results. The market wants to see the next level of growth, and Palantir apparently couldn't deliver that certainty.
This is where I start to think Burry’s move is more calculated than just a gut feeling about a bubble. He's not necessarily saying AI is a sham; he's saying the market is irrationally exuberant about its near-term potential.
So, What's the Real Story?
Burry is betting on a correction, not a collapse. He is betting that the market will adjust its expectations for AI growth. Whether that correction will be a gentle pullback or a full-blown crash remains to be seen. I find it odd that Scion liquidated nearly its entire equity portfolio after disclosing the put on Nvidia in Q1. It tells me Burry is taking a "better safe than sorry" approach. In other words, he's not just shorting AI; he's de-risking his entire portfolio. Given the broader economic uncertainty, that might be the smartest move of all. What will the actual numbers look like in the Q4 reports? I don't know, but I'm setting an alert to find out.