Quick Read
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Burry’s bearish puts on AI stocks like Palantir and Nvidia may be right in thesis but dangerously early in timing.
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A 1987-style crash would create quality buying opportunities, given that investors who held through that crash recovered within two years.
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After a strong recovery bounce for the semiconductors and most other names tied to the AI trade that Dr. Michael Burry is betting against by way of bearish put options, the big question is whether Dr. Burry has gotten the timing wrong or perhaps the whole bearish thesis about the AI trade as a whole. Undoubtedly, valuations on a number of names are certainly hard to justify. Whether we’re talking about Palantir (NASDAQ:PLTR), Tesla (NASDAQ:TSLA), or even Caterpillar (NYSE:CAT), it’s easy to see why Dr. Burry has set his sights on such names.
At the same time, overvaluation and overbought conditions don’t necessarily mean that a short will be a walk in the park. Overvalued stocks can stay the way for quite a while and, what’s more, they can become even more overvalued. In the case of Palantir and the many AI names that are shrouded in uncertainty, I do think that it’s just as risky to bet against as it is to go long, especially with put options where timing is everything.
Dr. Burry is onto something, but the big question is whether he’s too early
While Dr. Burry’s track record speaks for itself, the big question this time around is whether he’s early. And, if he is, how long it’s going to take before the names on his radar finally do implode. It’s been a wild ride for AI stocks this summer. And it’s easy to get startled at the first signs of heightened volatility. Of course, volatility works in both directions, which is what makes following Dr. Burry’s shorts unadvisable.
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With Dr. Burry recently bringing up 1987 and the potential for a market top, questions linger as to how things will end for the AI high-flyers that have been met with heightened expectations and increasing skepticism about the longevity of their glorious runs, which, in the case of semiconductors, tends to be cyclical. At least that’s what history suggests.
Though, things may very well be different this time around with the AI revolution. Regardless, I think bearish bets against Micron (NASDAQ:MU), Nvidia (NASDAQ:NVDA), and more aren’t going to be covered so easily, especially now that Dr. Burry doesn’t have to answer to anybody else. It’s not like he’s running the show over at Scion Asset Management anymore.
