Michael Burry's $1 Billion AI Bet: Why the Legendary Contrarian Thinks Nvidia and Palantir Will Crash

The investor who made billions shorting the 2008 housing collapse now claims he’s found the market’s next catastrophe—and it’s hiding in plain sight within the AI sector. Michael Burry has recently taken significant positions betting against Nvidia and Palantir Technologies, two companies whose combined valuation exceeds $5 trillion and have been instrumental in driving markets to record highs.

What makes this move notable isn’t just Burry’s track record, but his renewed public stance after years of relative silence. His latest venture, a paid newsletter called Cassandra Unchained on Substack, has attracted over 171,000 subscribers willing to pay $379 annually for his market insights—a clear indication that his contrarian appeal remains potent among investors seeking alternative perspectives.

The Thesis: A Familiar Pattern Repeating

Burry frames his position within historical context, drawing explicit parallels to the dot-com bubble. However, he makes a crucial distinction: “It wasn’t really a dot-com bubble. It was a data-transmission bubble,” he explained during a podcast appearance with author Michael Lewis. The current AI surge, by his analysis, represents something similarly disconnected from fundamental value—excessive capital flowing into infrastructure and companies without corresponding economic justification.

His specific concern centers on artificial relationships between major tech firms. Burry observes that companies like Oracle and Meta Platforms are receiving financial assistance from Nvidia to fund chip purchases—a dynamic reminiscent of how Enron artificially supported vendor spending in the late 1990s. Additionally, he’s scrutinized accounting practices around chip longevity, suggesting that companies inflate earnings projections through questionable asset lifecycle assumptions.

The Specific Bets: Math That Could Pay Off Massively

Burry’s actual positions are relatively modest in size but carry enormous potential payoff. His approximately $10 million in put options could exceed $1 billion if his predictions materialize by 2027.

On Palantir: His thesis involves concerns about government contract dependency, excessive executive compensation, and intensifying competition—particularly from International Business Machines. He’s positioned for the stock to decline from its recent $200 trading range to $50 per share, representing a 75% downside.

On Nvidia: The semiconductor giant faces pressure if major customers face headwinds. Burry anticipates a 37% decline to $110 per share, down from approximately $190. His reasoning suggests a domino effect: if the AI spending narrative cracks, customers reduce orders, companies miss earnings targets, stock prices plummet, and future investment dries up.

Past Predictions Muddy the Picture

Burry’s credibility has taken hits in recent years. His call to “SELL” in January 2023 preceded Silicon Valley Bank’s collapse by two months, yet the S&P 500 climbed roughly 70% afterward—a bet he’s publicly acknowledged as incorrect. On social media, critics quip that he’s “predicted 20 of the last two recessions,” reflecting skepticism about his recent forecasts.

Michael Green, chief strategist at Simplify Asset Management, notes a consistent pattern: “If Michael had one failing in the dot-com cycle, it was being early to the process. The housing bubble? It was being early to the process.” Timing remains Burry’s perpetual vulnerability.

Corporate Pushback and Market Response

Palantir CEO Alex Karp has dismissed Burry’s analysis on television, while Nvidia released a formal rebuttal, stating: “Nvidia does not resemble historical accounting frauds because Nvidia’s underlying business is economically sound, our reporting is complete and transparent, and we care about our reputation for integrity.”

Since Burry unveiled his positions in early November, both stocks have experienced volatility but no sustained collapse. Green suggests the market may have actually become more entrenched: “I would argue that awareness of this has encouraged people to defect and become more convinced that stocks can go to unlimited levels.”

The irony is striking: heightened awareness of Burry’s warnings may be reinforcing investor conviction rather than sparking capitulation. His historical success in predicting the housing crisis has created a paradox—when contrarians cry wolf, markets sometimes respond by doubling down on the very positions under attack.