Michael Burry Reveals Short Bets Against Nvidia and Palantir

Michael Burry has intensified his criticism of major AI companies, particularly Nvidia and Palantir, revealing he is taking short positions against them. In a recent Substack post, titled “Unicorns and Cockroaches: Blessed Fraud,” Burry questioned Nvidia’s recent responses to concerns he raised, suggesting they misrepresented his views.

Key Assertions by Michael Burry

Burry, famed for his successful bet against the housing bubble depicted in “The Big Short,” expressed disbelief at Nvidia’s rebuttal document. He characterized it as filled with “one straw man after another,” suggesting it resembled a hoax rather than a credible response from a leading company in the industry. Burry clarified that he had never claimed Nvidia was delaying the depreciation of its assets, describing it as primarily a chip designer with limited capital expenditures.

Concerns About Chip Depreciation

• Burry highlighted his concerns regarding how AI companies account for asset depreciation.
• He noted that companies might inflate their short-term earnings by extending the projected lifespan of assets.
• This practice could lead to significant asset writedowns in the future.

He also referenced a recent comment from Microsoft CEO Satya Nadella, who mentioned curtailing data center expansions due to fears of overbuilding for a single generation of AI technology.

Burry’s Investment Positions

In his Substack post, Burry disclosed his short positions in both Nvidia and Palantir, specifically stating he owns puts against these companies. His pessimistic outlook comes as Nvidia shares have seen a 14% decline since their peak on November 3, raising alarms among investors about potential overspending in the AI sector.

Market Reaction

Burry’s critique and subsequent betting against these tech giants sparked a noteworthy market discourse. Palantir’s CEO, Alex Karp, labeled Burry’s positions as “batshit crazy.” Burry countered by commenting on Karp’s misunderstanding of essential financial disclosures.

Valuation Concerns

As of now, Palantir’s market valuation stands around $390 billion, a staggering amount nearly 90 times its anticipated $4.4 billion revenue for the current year. Despite a significant rise earlier this year, shares have dropped 20% following earnings reports.

Conclusion

Burry’s public skepticism towards Nvidia and Palantir showcases his broader concerns about the AI industry’s practices and the potential for future financial instability. His well-documented investment strategies continue to attract attention as he navigates an evolving market landscape.