Michael Burry’s new short bets spook market and anger Palantir CEO, but his trade is likely underwater
Michael Burry unnerved investors this week with seemingly fresh wagers against artificial intelligence favorites Nvidia and Palantir Technologies . However, despite the splash his disclosure made, the famed “Big Short” investor is likely sitting on losses from those bearish bets. Burry’s hedge fund, Scion Asset Management, held about 50,000 put contracts on Palantir and 10,000 on Nvidia at the end of the third quarter, according to a regulatory filing. The news exacerbated a sell-off in AI names Tuesday as investor concerns about sky-high valuations deepened. The disclosure also prompted a sharp reaction from Palantir CEO Alex Karp, who called Burry’s wagers “super weird” and “batsh– crazy.” Still, market veteran and co-founder of Market Rebellion Jon Najarian believes Burry’s trades are likely underwater. NVDA YTD mountain Nvidia year to date Nvidia’s stock today remains higher than at any point during the third quarter, meaning any put options initiated before the end of September have likely continued to lose value, depending on their purchase price and strike. PLTR YTD mountain Palantir year to date For Palantir, even if Burry had established his puts at the stock’s absolute highs in August, he would have only briefly approached breakeven during Tuesday’s decline, and that estimate doesn’t account for the erosion in option value from time decay over the past month. Per Najarian’s calculations, Nvidia would need to drop another 7% and Palantir another 5% for Burry’s trades to break even. “Under no circumstance could he not be deep in the red on both positions,” Najarian said. “I respect him a lot, but even with a big volatility pop, he’s down pretty big in both positions.” Burry’s early disclosure It’s also notable that Burry filed his holdings roughly a week earlier than the usual 13F deadline, a move that stood out for an investor who typically waits until the final allowed day to report, as many hedge funds do. The timing may have been deliberate, Najarian said. With markets looking stretched, Burry may have wanted to broadcast his caution before any rebound tied to a government shutdown reopening made his short bets appear poorly timed, Najarian said. Still, there’s a chance that the positions may no longer be active. The filing reflects Burry’s holdings at the end of September and may not represent his current portfolio. He has been known to move quickly in and out of high-profile trades. Burry declined to comment on his positions. Burry hinted at his broader market view last week with a cryptic post on X. “Sometimes, we see bubbles. Sometimes, there is something to do about it. Sometimes, the only winning move is not to play,” he wrote. For now, his warning against market euphoria may still ring true, but his trades suggest that spotting a bubble is one thing, and profiting from it is another. Despite his legendary track record during the housing crisis, some of Burry’s views have appeared to be off as of late. In early 2023, he posted a single-word message on X: “Sell.” However, the market rallied significantly after his warning as the AI boom ignited a tech-led rally. In Wednesday’s trading, Nvidia was up slightly after a 4% decline on Tuesday. Palantir was off another 4% after an 8% decline Tuesday following what appeared to be stellar results.
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