Burry's Big Bet: AI Stocks Tumble After $1B Wager

Michael Burry, renowned for foreseeing the 2008 financial crisis, has placed a substantial $1 billion wager against prominent AI stocks. This strategic move, revealed on November 4, has seen Palantir and Nvidia, major players in the artificial-intelligence boom, experience significant market value declines. Palantir shares have fallen over 33 percent from their early November price, erasing $161 billion in market capitalization. Nvidia's stock has decreased by 15 percent, contributing to a peak valuation drop from over $5 trillion to $4.25 trillion.

The investor's bearish positions, comprising put options valued at approximately $900 million against Palantir and $187 million against Nvidia, are now showing considerable returns. This success contrasts with the initial skepticism faced by Burry, whose investment strategy was famously depicted in "The Big Short." Both companies had experienced dramatic surges in the 12 months preceding Burry's bet, with Palantir climbing over 250 percent and Nvidia around 180 percent, driven by intense investor enthusiasm for AI-related equities.

Recent market reactions suggest heightened volatility for AI stocks. Palantir's shares, despite initially surging on positive earnings reports earlier this week, ultimately plunged 13 percent by the market close, negating earlier gains. This pattern has fueled concerns among market watchers that the current sell-off could signal a wider market correction. Burry's investment approach historically targets speculative excesses, as seen in his previous warnings about meme stocks and cryptocurrencies, and his strategic portfolio adjustments ahead of market downturns.