Michael Burry, the investor famed for betting against the housing market in the mid-2000s, is escalating his bearish stance on three of the market's most prominent AI beneficiaries. According to recent filings, Burry has replaced outright short positions in Nvidia, Palantir, and Micron with put options expiring in 2027. This shift suggests he expects a prolonged period of underperformance, rather than an imminent collapse.
The timing is notably contrarian. Nvidia closed Tuesday at $239.24, pushing its market capitalization near $5.8 trillion. Palantir ended the session at $192.07, while Micron closed at $1,045.56. These levels reflect substantial gains driven by AI enthusiasm, yet Burry's thesis is not that AI demand will vanish. Instead, he argues that current valuations leave little room for even minor disappointments.
Nvidia: The Purest Test of AI Expectations
Nvidia sits at the heart of the AI capital-expenditure cycle, making it the clearest expression of Burry's concern. The stock is approaching a $6 trillion valuation, and Wall Street remains overwhelmingly bullish. BNP Paribas analyst Karl Ackerman recently raised his price target to $345, citing Nvidia's ability to sustain gross margins above 70% and maintain its dominant position through its CUDA software ecosystem.
That confidence is precisely what makes the bearish case compelling. The risk is not necessarily a collapse in GPU demand but whether hyperscaler capital spending can continue rising at a pace sufficient to justify the expectations already baked into Nvidia's price. Joachim Klement, a strategist at Panmure Liberum, warned via MarketWatch that upcoming earnings and 2027 guidance could deliver an AI “reality check” if hyperscaler spending disappoints. Burry is effectively betting against the valuation attached to Nvidia's dominance, not the technology itself.
Palantir: Growth May Not Be Enough
Palantir presents the most straightforward valuation argument among the three. The stock trades around $192, while the average Wall Street target tracked by Investing.com is approximately $195.57, implying minimal consensus upside despite robust growth. Jefferies analyst Brent Thill, who rates the stock Underperform, acknowledged the acceleration in Palantir's U.S. business—where revenue surged 115% last quarter—but noted that comparisons become increasingly difficult as expectations climb and international growth moderates.
Burry's positioning aligns with this view. Palantir does not need to stumble operationally for its stock to fall. If investors have already priced in exceptional revenue growth, expanding margins, and rapid AI monetization, merely delivering good results may not be sufficient to sustain the share price.
Micron: Cyclical Risks Loom
Micron is the most nuanced component of Burry's trade because the stock appears inexpensive despite its rally. Shares closed Tuesday at $1,045.56, trading at 5.9 times forward earnings. The company recently reported record revenue, an 87% adjusted gross margin, and strong guidance, driven by AI demand colliding with tight memory supply.
Burry's bearish thesis focuses on the supply side. He views scarcity, rather than demand alone, as a key driver of memory pricing and expects new production capacity over the next two years to pressure the cycle. Bank of America analyst Vivek Arya offers a bullish counterpoint, acknowledging that memory prices and margins “will inevitably normalize at some point,” yet he maintains a Buy rating because he believes earnings could remain well above prior-cycle peaks even in a downturn.
That distinction captures the essence of Burry's broader bet. Nvidia can remain dominant, Palantir can keep growing, and Micron can stay profitable while their stocks still fall if expectations reset. His puts are a wager against the price of perfection.
This article is for informational purposes only and does not constitute financial advice.
