Michael Burry, the famous investor from The Big Short, is making headlines again. The man who predicted the 2008 housing crash has placed a $1.1 billion bet against Nvidia and Palantir Technologies, two of the biggest names in artificial intelligence.
Michael Burry’s move became public on Monday through new filings that showed he used put options to short both companies. The news quickly hit the market, and tech stocks started dropping right away.
By Tuesday, Palantir’s stock had fallen as much as 16% before closing about 8% lower. The fall happened even though the company had strong third-quarter earnings and raised its full-year forecast. Nvidia’s stock also dipped 2–4%, while the Nasdaq Composite recorded its biggest one-day drop in nearly a month—around 2%. All the stocks of so-called Magnificent Seven AI group ended the day with a loss.
The sell-off spread overseas, too. Asian and European markets dropped in the following days, especially in Japan and South Korea, as investors began worrying about high tech valuations around the world.
Palantir has had a harder time bouncing back than Nvidia. The data analytics firm now trades at a price-to-earnings ratio of about 254 and a price-to-sales ratio near 115. Those high numbers make the stock more sensitive to selling pressure. Palantir is also trading below its 50-day average, which some traders see as a bearish signal.
Nvidia, on the other hand, handled the pressure better. The company, which owns about 80% of the AI chip market, never dropped below its 50-day line. Many analysts say its strong fundamentals and tech leadership helped limit the damage.
Even so, both stocks are still below their previous highs. Burry’s short bet has brought new caution into the AI market. Some investors are now rethinking whether these stocks are priced too high.
His move came just as major Wall Street leaders started warning about possible market corrections. CEOs from Morgan Stanley and Goldman Sachs both said investors should be ready for 10–20% drops in the next couple of years. Deutsche Bank has also started looking at ways to protect itself from heavy exposure to AI-related stocks.
Michael Burry also called out what he sees as “circular financing” in the AI world—where big tech firms fund or lend to partners like OpenAI, Oracle, or CoreWeave, who then spend that money on Nvidia’s chips. Analysts at Seaport Global Securities said this looks like “bubble-like behavior” and questioned if AI demand is really as natural as it seems.
Palantir CEO Alex Karp didn’t hold back. He fired back at Michael Burry, calling his short “batshit crazy.” Karp said the move will push his company to perform even better “to make them poorer.”
For now, investors are watching closely. Whether Michael Burry is right again or just early, his bet has reminded everyone that even the hottest AI stocks aren’t immune to risk.
*Image source: Tony Avelar/Bloomberg via Getty Images
