The AI Reckoning: Michael Burry's $1 Billion Bet Against Tech Giants

After calling the 2008 housing crash, Michael Burry is now warning that artificial intelligence companies are riding a massive bubble—and he’s putting real money behind his conviction. The legendary investor has opened significant short positions against Nvidia and Palantir Technologies, positioning for potential drops of up to 37% and 75% respectively by 2027. His wager: roughly $10 million in put options that could balloon into over $1 billion if these companies collapse.

Nvidia and Palantir currently command a combined market valuation of approximately $5 trillion, having become the primary drivers of this year’s stock market rally. Yet Burry sees a fundamental disconnect between their valuations and underlying reality—a pattern he believes mirrors the dot-com bubble of the early 2000s.

The Case Against the Tech Darlings

Burry’s bearish thesis centers on structural weaknesses at both companies, though through different lenses. At Palantir, he highlights excessive dependence on government contracts with limited growth potential and executive compensation that appears disconnected from shareholder value. International Business Machines’ competitive threat further complicates the picture, in his view. For Nvidia, the concerns run deeper into questionable vendor financing arrangements reminiscent of Enron-style accounting tricks.

His specific grievance: Nvidia appears to be helping major clients like Oracle and Meta Platforms fund their own chip purchases—a circular arrangement that inflates revenue while obscuring true demand. Additionally, Burry has questioned accounting practices around semiconductor durability, suggesting companies may be artificially extending product lifecycles to boost reported earnings. Should this narrative unwind, the domino effects could be severe: lower profits, collapsing valuations, and significantly reduced future sales for Nvidia.

The Credibility Question

Here’s the catch—Burry’s track record outside the housing market is spotty at best. He’s issued numerous market crash predictions over the past 15 years with minimal accuracy. Most notably, his January 2023 “SELL” warning preceded a 70% rally in the S&P 500, a call he’s since acknowledged as wrong. The failure led critics to joke that Burry has predicted “20 of the last two recessions,” undermining his current warnings despite his earlier prescience.

Even Palantir CEO Alex Karp dismissed him on national television, while Nvidia released a formal statement defending its accounting integrity and business fundamentals. These corporate pushbacks, however, haven’t deterred Burry’s recent media blitz, including his new Substack newsletter “Cassandra Unchained,” which attracted 171,000 subscribers at $379 annually.

Market Response: The Real Test

Since Burry publicly revealed his positions in early November, both stocks have experienced volatility but no dramatic declines. Market participants remain split on whether his warnings represent genuine foresight or another premature call. Some analysts argue his visibility may actually reinforce bullish conviction—after all, what better endorsement for unlimited upside than a famous skeptic’s failed prediction?

The fundamental tension remains unresolved: Is Burry identifying a genuine threat to valuations disconnected from economic reality, or repeating the timing mistakes that historically plagued him? For now, investors holding these positions are betting he’s wrong again.