The investor who predicted the 2008 crisis is back: he bets $1 billion against NVIDIA and Palantir
Michael J. Burry, the investor who became world famous for anticipating the great financial disaster of 2008, a story told in the film ‘The Big Short’, is once again at the center of the news. His investment firm, Scion Asset Management, has put two of the star companies of the moment in its sights: NVIDIA and Palantir.
Burry’s firm has made a financial maneuver known as a short position. This basically means that you have bet a huge amount of money that The value of the shares of these two companies is going to plummet. If they fall, Burry will make a lot of money, but if they rise, he will lose it. This movement has been executed at a time when NVIDIA has exceeded 5 billion stock market valuation.
A bubble about to burst?
The bet is not small. The total value of this financial operation exceeded 1 billion dollars as of September 30. Although it is not certain that Burry maintains that exact position today, the simple revelation of his intentions has caused immediate falls in the stock market for both technology companies.
This move confirms what Burry has been hinting at for some time. The investor, who uses the nickname Cassandra on social networks, like the prophetess who warned of disasters, believes that the enthusiasm for artificial intelligence is exaggerated. Last Halloween he posted a cryptic message: “Sometimes, we see bubbles. Sometimes, there is something to do about it. Sometimes, the only winning move is not playing.” It should be noted that he is not the only one who has started talking about an AI bubble.
In fact, it is increasingly evident that the fear of a bubble has grown. Billions are being invested in AI, but many companies still don’t have a clear path to making money from it. Burry has also pointed to what he calls “circular agreements.” This happens when AI companies themselves invest in each other, which can inflate their ratings artificially.
The reaction to Burry’s bet was overwhelming. While NVIDIA suffered moderate declines, Palantir received a bigger blowplummeting almost 7%. Palantir CEO Alex Karp quickly went on television to call the idea of a bubble “absurd,” in a tone that many described as visibly concerned.
