The AI Investment Thesis Under Fire: Michael Burry Doubles Down on Massive Put Options Against Tech Giants

The legendary investor who profited enormously from shorting the housing crisis is making headlines once again—this time targeting what he believes is an inflated artificial intelligence market. Michael Burry has wagered substantial capital on the collapse of Nvidia and Palantir Technologies, two companies that have fueled this year’s stock market rally while accumulating a combined valuation approaching $5 trillion.

What distinguishes Burry’s latest move from his previous market calls is not just the scale, but his willingness to go public after years of relative silence. His December venture into newsletter publishing—launching Cassandra Unchained on Substack with over 171,000 subscribers paying $379 annually—signals a strategic shift toward explaining his bearish outlook on artificial intelligence equities.

The Timing Question That Haunts Contrarian Investors

One of Burry’s known vulnerabilities in past market cycles was premature positioning. Michael Green, chief strategist at Simplify Asset Management and himself a skeptic of prevailing investment trends, points out this pattern: “Michael’s issue wasn’t being wrong about direction—it was being ahead of the curve.”

This critique carries weight. Since his celebrated housing market victory, Burry’s market predictions have shown decidedly mixed results. His January 2023 “SELL” signal preceded Silicon Valley Bank’s collapse by two months, yet the S&P 500 has climbed approximately 70% since then. He later acknowledged this miscalculation publicly.

The Current Bet: Scale and Specificity

Rather than speculative positioning, Burry’s November play demonstrates calculated precision. His put options, valued around $10 million initially, could expand to exceed $1 billion should the targeted stocks experience sharp declines by 2027. The specific price targets reveal his analytical depth: Palantir must fall to approximately $50 per share (down from $200), while Nvidia requires roughly a 37% plunge to $110 (currently near $190).

His rationale for each position differs markedly. For Palantir, Burry identifies structural weaknesses: excessive reliance on government contracts, problematic executive compensation structures, and intensifying competition from established players like IBM. The software company’s valuation, he contends, doesn’t align with these operational realities.

Nvidia’s vulnerabilities, in Burry’s assessment, stem from interconnected customer relationships. He highlights concerning patterns among major buyers including Oracle and Meta Platforms—specifically financing arrangements that echo problematic vendor-financing schemes historically associated with companies like Enron. Additionally, Burry questions the accounting treatment regarding chip longevity and asset depreciation, suggesting these decisions artificially inflate reported profitability.

The Defiant Response from Leadership

Alex Karp, Palantir’s chief executive, dismissed Burry’s thesis on CNBC, characterizing it as fundamentally misguided and market-manipulative. Nvidia similarly refuted the accusations, issuing a statement emphasizing the soundness of its underlying business model, transparent financial reporting, and institutional commitment to integrity.

Since Burry’s November 3rd disclosure, both stocks have experienced downward pressure, though the movements have proven volatile and inconsistent—hardly the capitulation Burry anticipates.

Drawing Parallels to Historical Bubble Dynamics

During a podcast appearance, Burry likened the current AI investment phenomenon to the dot-com era, though with a crucial distinction. “It wasn’t truly a dot-com bubble,” he explained to host Michael Lewis. “It was fundamentally a data-transmission bubble.” The underlying mechanism matters: today’s capital allocation into AI infrastructure and hardware companies, he suggests, exhibits similar disconnects between valuations and underlying economic reality.

The broader implication of Burry’s thesis extends beyond individual stock performance. Should the AI infrastructure narrative collapse as he predicts, a cascade could unfold: compressed profit margins, equity price deterioration, and subsequently reduced capital expenditure flows—ultimately undermining future demand for the very hardware driving Nvidia’s current prominence.

Market Skepticism and Social Media Reality

The investment community hasn’t unanimously embraced Burry’s outlook. Social media commentators frequently invoke the sardonic observation that Burry has “predicted 20 of the last two recessions,” highlighting the reputational cost of multiple premature calls. His credibility, while rooted in one spectacular success, has been diluted by subsequent misfires across multiple market cycles.

Yet Burry’s contrarian positioning continues attracting attention precisely because of its specificity and the scale of his personal conviction. Whether this reflects prescient identification of genuine market distortion or another example of being right directionally but catastrophically wrong on timing remains an unresolved question within financial markets.