Michael Burry, the real-life inspiration behind "The Big Short," has once again positioned himself against Wall Street's mainstream consensus. This time, his targets are the two AI powerhouses underpinning the U.S. stock market rally: NVIDIA and Palantir. Burry is convinced that the market has lost touch with reality, arguing that the AI industry is inflating a massive bubble akin to the dot-com crash. He has already established bearish positions through the options market, aiming to profit from potential stock declines of these tech giants.
The feud between this investor, who accurately predicted the subprime crisis, and the world's most valuable companies has intensified markedly in recent times. Not only has Burry publicly disclosed his short positions, but he has also fiercely criticized the internal memo NVIDIA released to counter doubts, dismissing it as filled with "straw man arguments" and reading "like a scam." He bluntly points out that genuine risks are being concealed—with accelerating technological迭代, the huge capital expenditures of NVIDIA's clients face the looming threat of future asset write-downs.
According to information disclosed on November 3, Burry has shorted the two companies by purchasing put options, with the current cost of this bet standing at approximately $10 million. If the market experiences a sharp crash as he anticipates, the potential return on this investment could exceed $1 billion.
"It's like a scene from a movie," Burry quoted his famous line from "The Big Short." "I may be early, but I'm right." He acknowledges having a history of entering too soon during both the dot-com bubble and the housing bubble, yet he draws a parallel between the current AI frenzy and the "data transmission bubble" of yesteryear. Currently, he is articulating this grand narrative to investors through his newly launched newsletter "Cassandra Unchained," warning that the bubble's burst is merely a matter of time.
Clash of the Titans: The Memo Dispute and the "Straw Man" The focus of their debate has shifted from mere valuation concerns to the deeper logic of accounting practices and technological迭代. As previously reported by Wall Street News, in response to skepticism, NVIDIA recently distributed a seven-page memo to analysts, emphasizing the economic soundness of its business, the transparency of its financial reporting, and denying allegations of "circular financing" and accounting fraud. In the memo, NVIDIA argues that its clients typically set the depreciation period for GPUs at 4 to 6 years, which aligns with the actual service life of the equipment.
However, Burry remains unconvinced. In a point-by-point rebuttal on Substack, he dismissed NVIDIA's response as a "disappointing" "straw man argument"—attacking positions that were never actually put forward. Burry notes that as a chip design company, NVIDIA's own depreciation policies are irrelevant; his core concern lies with its clients, such as hyperscale data centers operated by Microsoft and Meta.
Burry warns that NVIDIA's clients are extending the useful life of chips to 5 to 6 years in their accounting practices to embellish short-term profits. In reality, though, with the rapid迭代 of AI technology, newer chips could render existing hardware functionally obsolete as early as 2026 to 2028. He cites Microsoft CEO Satya Nadella's remarks about slowing data center construction as evidence, pointing out that overbuilding and technological迭代 will lead to significant asset write-down risks in the future.
Michael Green, chief strategist at Simplify Asset Management, notes that Burry's historical Achilles' heel has often been "being too early." Whether during the dot-com bubble or the housing bubble, he endured substantial pressure from premature entries. Burry responded on social media platform X by quoting a line from the character he inspired in "The Big Short," played by Christian Bale:
"It seems this will pay off. I may be early, but I'm not wrong."
The specific shorting logic targeting NVIDIA and Palantir In a podcast hosted by author Michael Lewis, Burry described NVIDIA and Palantir as "the two luckiest companies on the planet," though his shorting rationales for each, while distinct, are interconnected.
Regarding Palantir, Burry argues that the company overly relies on stingy government contracts and doles out excessively generous executive compensation. He also points out that Palantir faces intense competition from rivals like International Business Machines.
As for NVIDIA, the world's most valuable company, Burry's concerns center on its client relationships and accounting practices. He highlights complex issues between NVIDIA and clients such as Oracle and Meta. Burry alleges that NVIDIA is propping up sales by funding clients' purchases of its products—a practice reminiscent of Enron's financial support for suppliers to buy its own products. He warns that if the bubble bursts, a chain reaction of declining profits, shrinking stock prices, and reduced investments will severely batter NVIDIA's future sales.
Past track record and market controversy While Burry rose to fame for his 2008 financial crisis prediction, many of his crash forecasts over the past 15 years have failed to materialize. Social media is rife with mockery, joking that he "successfully predicted 20 of the last two recessions."
On January 31, 2023, Burry posted urging followers to "SELL." Although Silicon Valley Bank collapsed two months later, the S&P 500 has since risen by approximately 70%. Burry later admitted the call was wrong but defended his track record on X, stating that after the two bank failures and market decline, he revised his view at the bottom and recommended buying.
Currently, Burry faces the risk of being "early" once again. As depicted in "The Big Short," if his judgment on the AI bubble proves correct, he stands to reap enormous rewards; if wrong or poorly timed, his short positions could become worthless within quarters.