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Michael Burry has become one of the most-followed investors in the market. Although he disbanded his hedge fund, Scion Capital, late last year, he still invests. He also frequently shares his thoughts on the market and various stocks on his Substack, Cassandra Unchained, and on social media.
He's made no secret of his views on overinvestment in artificial intelligence (AI) and overpriced AI stocks. In one of his most recent posts on X, he warned that, "By early 2000, 70-80% of stocks were in bear markets, and the indexes continued to move higher. I have a word for that. Denial."
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To that end, he's made several short bets against some of the biggest and most important AI stocks. Given that Burry made his original fortune by betting against the U.S. real estate market ahead of the 2008 mortgage crisis -- a prescient gamble that was later chronicled in Michael Lewis's book The Big Short and the film of the same name -- this is his game.
However, so far, some of his recent bearish bets have not paid off. He has puts on Nvidia (NASDAQ: NVDA), Palantir Technologies (NASDAQ: PLTR), and Oracle (NYSE: ORCL), among others, but those stocks have not all sunk in the way that he hoped they would. Does that mean it's time for his followers to move on?
Burry says the market is in denial, and asserts that borrowed money is propping it up. He also says that ahead of other recent crashes, the "denial stage" lasted six to nine months.
He's buying solid retail stocks like MercadoLibre and Deckers Outdoor, but he's still short on several major AI stocks, including Nvidia, Palantir, and Oracle. He's been publicly negative about Nvidia, casting doubt on the math it's using to describe the depreciation rate of its chips, and what those used chips will be worth over time. He rolled his original Nvidia puts over into new ones with September 2027 expiration dates, and his Palantir and Oracle options expire in September 2027 and December 2027, respectively.
His first public disclosure of his Nvidia and Palantir positions was made while he was still running Scion Asset Management last year. The Nvidia puts were revealed in the first quarter, while the Palantir puts were revealed in the third quarter. The Oracle position is more recent, and was disclosed in January of this year.
So far, he's been right about Oracle, but wrong about Nvidia and Palantir.
According to Burry, there's still some time left in the "denial" phase, which is why he's holding onto his puts. He is certainly at odds with many other analysts, who still see great things for Nvidia and Palantir. However, going against the grain is how he earned his reputation.
I would still follow Burry, even if you're an AI investing enthusiast. He may be wrong for now, but seeing the bear case could help you maintain an objective perspective and possibly sell before it's too late, whenever the next correction may be.
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Jennifer Saibil has positions in MercadoLibre. The Motley Fool has positions in and recommends Deckers Outdoor, MercadoLibre, Nvidia, Oracle, and Palantir Technologies. The Motley Fool has a disclosure policy.
Michael Burry Is Bearish on Palantir, Which Is Up 19% Over the Past Year, but His Oracle Short Just Got a Boost From a 53% Stock Drop. Is His AI Bubble Bet Still Worth Following? was originally published by The Motley Fool
