That guy from The Big Short movie who correctly predicted the World Financial Crisis has just placed a billion-dollar bet against Nvidia (and AI specialist Palantir)
As if to prove the circularity of art imitating life imitating art imitating life, the guy who got famous for his portrayal in the 2015 movie The Big Short, Michael Burry, has just placed a $1 billion bet against Nvidia and AI specialist Palantir. That is, quite literally, a big short on Nvidia.
Thanks to both the film and reality, Burry made his name foreseeing the sub-prime housing market collapse and World Financial Crisis it precipitated in 2008. Fair to say he has form when it comes to predicting financial catastrophe.
According to Fortune, it seems Burry sees just such a calamity befalling Nvidia. His hedge fund, known as Scion Asset Management, has reportedly bought $1 billion in put options on Nvidia and another AI-adjacent company, Palantir.
In really simple terms, put options give the holder the right to sell a company's stock at a fixed price in the future rather than the prevailing market price. In practice, put options are typically a device with which to bet against company, the idea being that if the price of the company goes down by the time the option matures, that gives you the opportunity, in effect, to buy the stock at the lower price and then resell at the higher "strike" price defined by the option. And then you pocket the difference, ker-ching!
Anywho, this move by Burry, revealed in regulatory filings, only adds to the burgeoning narrative of a massive tech bubble centred on Nvidia. Burry himself obliquely referred to this in an X post on October 31 which said, "Sometimes, we see bubbles. Sometimes, there is something to do about it. Sometimes, the only winning move is not to play," above an image of Christian Bale depicting Burry himself in The Big Short.
Of course, just because Burry got the WFC right, doesn't mean he's got this right. Back in January 2023, Burry made a single-word post, "Sell" on then-Twitter, only to delete his account shortly thereafter.
Here we are, over two years later, and the likes of the NASDAQ and S&P 500 stock indexes are at all time highs and Burry's implied petition to exit the market in 2023 looks a little premature, to say the least. As one wag on X put it in reply to Burry's latest warning, "you've called nine of the last one bubbles." Ouch.
Still, Burry is hardly the only major market player who doesn't like the look of the huge amounts of money currently being thrown about in the name of AI. Investing guru Warren Buffet has reportedly taken $6 billion out of the markets of late.
In reality, what happens from here is anyone's guess. Should AI turn out to deliver on all the hype, even Nvidia's recent $5 trillion market valuation may seem modest. Or maybe the industry will struggle to get past its current slop-generating phase, in which case it all goes pop. But at least if the worst does happen, perhaps Nvidia will pay a bit more attention to gaming graphics cards again. We can but hope.