Michael Burry Shorts Nvidia and Palantir Amid AI Market Volatility

November 15, 2025 at 19:10 UTC

8 min read

Bearish chart showing Nvidia and Palantir stocks with AI market volatility theme

Key Points

Michael Burry, famed for predicting the 2007-2008 financial crisis, has taken short positions on Nvidia and Palantir, betting on a decline in their stock prices amid concerns of an AI sector bubble.
Palantir's stock has surged 224% in the past year but carries an extremely high price-to-sales ratio of 124, far exceeding peers and historical tech bubbles, raising valuation concerns.
Nvidia, a leader in AI chip manufacturing, trades at a price-to-sales multiple of 29, near dot-com era peak levels, with competition from AMD and Broadcom potentially limiting future growth.
Despite recent sell-offs and fears of an AI bubble, analysts and industry leaders emphasize ongoing massive investments by Big Tech in AI infrastructure, suggesting a sustained multi-year growth cycle.

Michael Burry's Short Positions Signal Caution in AI Stocks

Michael Burry, renowned for his prescient bet against the subprime mortgage market before the 2007-2008 financial crisis, has recently taken a bearish stance on two prominent artificial intelligence (AI) stocks: Nvidia and Palantir Technologies. According to filings from his hedge fund, Scion Asset Management, Burry purchased put options on both companies during the third quarter of 2025, effectively betting that their stock prices will decline. This move has drawn significant attention given Burry's historical influence and his reputation for identifying market excesses. His short positions come amid growing concerns that the AI sector, which has seen extraordinary gains, may be overvalued and vulnerable to a correction.

Valuation Concerns Surround Palantir Amid Rapid Stock Gains

Palantir Technologies has been one of the standout performers in the AI and data analytics space, with its shares climbing approximately 224% over the past year. Despite this momentum, Burry and other market observers have raised alarms about the company's valuation metrics. Palantir's price-to-sales (P/S) ratio stands at an extraordinary 124, a figure that dwarfs those of its software industry peers and even exceeds the peak multiples seen during the late 1990s dot-com bubble. This valuation expansion appears driven by strong positive sentiment and hype rather than fundamental earnings growth. Historical comparisons suggest that such elevated multiples are unsustainable, and Burry's short position may reflect a belief that Palantir's stock is due for a significant pullback. Nonetheless, some analysts remain optimistic about Palantir's long-term prospects, citing its ability to secure meaningful contracts across public and private sectors.

Nvidia's Market Leadership Faces Valuation and Competitive Pressures

Nvidia has established itself as a dominant player in the AI hardware market, particularly through its graphics processing units (GPUs) that power generative AI applications. The company's stock has benefited from unprecedented capital expenditures by hyperscalers seeking to expand AI infrastructure. As of November 2025, Nvidia trades at a P/S multiple of 29, a level comparable to the highest valuations during the dot-com era. While this is below Nvidia's historical peak multiples, it still suggests a valuation plateau that may limit further upside. Additionally, competition from Advanced Micro Devices (AMD) and Broadcom, which are gaining traction with their own AI accelerators and GPUs, could challenge Nvidia's market share and growth trajectory. These factors contribute to Burry's bearish outlook on Nvidia despite its strong revenue and profit performance.

Market Indicators and Historical Context Support Bubble Concerns

Several market indicators lend credence to concerns about an overheated AI sector. The S&P 500 Shiller CAPE ratio, a long-term valuation measure, hovers around 40, near its highest level in two decades. Concurrently, the Fear & Greed Index registers a low reading of 29, indicating prevailing market fear. Historically, elevated CAPE ratios have preceded sharp market corrections, notably during the late 1990s and 1920s. These metrics suggest that the current enthusiasm for AI stocks may be reaching unsustainable levels. Burry's short positions appear to be informed by these historical parallels, viewing the AI boom as a potential bubble similar to past technology manias.

Recent Market Volatility Reflects AI Sector Sell-Off and Investor Anxiety

The week leading up to mid-November 2025 saw significant selling pressure on AI-linked stocks, including Nvidia and Palantir, despite both companies reporting strong earnings. The Roundhill Magnificent Seven ETF, which tracks major tech stocks, declined by 3.8%, erasing roughly $1 trillion in market capitalization from mega-cap companies such as Apple, Microsoft, and Tesla. The Invesco QQQ Trust and the iShares Semiconductor ETF also experienced notable declines. Analyst commentary highlighted concerns that the AI boom may have advanced too rapidly, fueling fears of a bubble. Investor Michael Burry's short positions further intensified these worries. Market breadth narrowed as traders rotated into defensive sectors like energy and healthcare, awaiting clearer signals from inflation data and central bank policies.

Big Tech's Continued AI Investment Counters Bubble Fears

Despite the recent pullback and bubble concerns, many analysts and industry leaders emphasize that the AI-driven growth cycle remains robust. Wedbush analyst Dan Ives characterized the sell-off as a 'short-lived mini panic moment' and anticipates a major rally in tech stocks through the end of 2025 and beyond. He points to massive capital expenditures by hyperscalers such as Microsoft, Amazon, Alphabet, and Meta Platforms, which are accelerating investments in AI infrastructure. Big Tech's cloud spending is projected to reach between $550 billion and $600 billion in 2026, up from approximately $380 billion in 2025. These investments are expected to generate significant downstream economic activity, with estimates suggesting that for every dollar spent on Nvidia's products, $8 to $10 in value will be created through AI-enabled services and applications. This ongoing commitment to AI development supports a narrative of sustained secular growth rather than a short-term bubble burst.

Divergent Views from AI Startup Founders on Market Sentiment

Voices from the AI startup community reflect a nuanced perspective on the current market environment. Amjad Masad, CEO of AI coding platform Replit, acknowledged a recent cooldown in hype, noting that early enthusiasm for AI coding tools has tempered as the technology matures and some companies face revenue challenges. Conversely, Navrina Singh, CEO of Credo AI, which specializes in AI governance and risk management, expressed confidence that AI represents a fundamental shift rather than a speculative bubble. Singh emphasized that AI is already a major growth driver for businesses and that increased investment in capabilities, governance, and infrastructure is a rational response to this new reality. These contrasting views highlight the complexity of assessing AI's market trajectory amid evolving technological and economic conditions.

Broader Market and Economic Implications of AI Sector Volatility

The sharp decline in AI and tech stock valuations has broader implications for financial markets and the economy. A recent Financial Times report noted a $1.2 trillion sell-off in AI-related stocks, signaling heightened investor caution. Such rapid wealth erosion can have a negative wealth effect, potentially impacting consumer spending and economic growth. Comparisons have been drawn to the IT bubble of the late 1990s, where valuations far outpaced profit expectations, leading to a market collapse that affected multiple sectors. While the current AI sector is larger and more integrated into the economy, the speed and scale of the recent sell-off underscore the risks of concentrated market enthusiasm. Investors and policymakers are closely monitoring inflation data, central bank communications, and corporate earnings for signs of stabilization or further correction.

Retail Investor Interest and Market Dynamics in AI Stocks

Retail investors have shown significant interest in AI-related stocks, with platforms like Reddit's WallStreetBets and social media channels fueling discussions around companies such as Nvidia, Palantir, SoFi Technologies, Opendoor, BigBear.ai, and Rivian Automotive. Nvidia's stock experienced volatility partly due to SoftBank's complete divestment of its holdings, while the company's CEO and chief scientist received the 2025 Queen Elizabeth Prize for Engineering for contributions to AI. Other AI-focused companies like BigBear.ai have pursued strategic acquisitions to enhance their AI capabilities. Despite some skepticism and short-term price fluctuations, retail enthusiasm remains a notable factor in market dynamics, reflecting a blend of meme-driven narratives and fundamental earnings outlooks.

Long-Term Investment Perspectives on Nvidia and Palantir

While Michael Burry's short positions highlight near-term valuation risks, many analysts advocate for a longer-term investment horizon regarding Nvidia and Palantir. Nvidia is positioned to benefit from the secular growth of AI infrastructure, supported by ongoing hyperscaler demand and technological leadership. Palantir, despite its frothy valuation, continues to secure significant contracts and expand its presence in both government and commercial sectors. Some market commentators suggest that Burry's bearish bets may reflect a short-term view of the AI market, whereas the broader investment thesis remains bullish on the transformative potential of AI technologies. Investors seeking durable growth and market-beating returns may find these companies compelling within the evolving AI narrative.

Key Takeaways

Michael Burry's short bets on Nvidia and Palantir underscore concerns about an overheated AI stock market driven by high valuations and investor hype.
Despite recent volatility and bubble fears, substantial capital investments by Big Tech in AI infrastructure suggest a sustained multi-year growth cycle.
Valuation metrics for Palantir and Nvidia are at historically high levels, prompting caution but not consensus on an imminent market collapse.