After warning of a bubble, the latest positions of the "Big Short" are revealed: 80% of the positions are short on Palantir Tech and NVIDIA

After warning about the bubble, "Big Short" positions exposed: 80% of positions shorting Palantir and NVIDIA

Investor Michael Burry, known for the movie "The Big Short," is putting his warnings about the AI bubble into action. Recent regulatory filings show that approximately 80% of the holdings managed by his Scion Asset Management are concentrated in short positions against Palantir and NVIDIA, two iconic companies in the AI boom, drawing market attention due to the scale of his bets.

According to a previous article by Wall Street Watch, Burry recently posted a mysterious message on social media platform X, quoting classic films "WarGames" and "The Big Short," stating: "Sometimes we see bubbles. Sometimes we can take action. Sometimes the only winning strategy is not to play the game." He then hinted that the returns on AI investments are too low, similar to the excessive capital expenditures on fiber optics during the internet bubble, and that many leading companies in the current AI boom will ultimately collapse.

The 13F filing released two weeks in advance confirms that Burry is indeed "taking action." His put options against Palantir have a nominal value of up to $912 million (equivalent to 5 million shares), while the nominal value of put options against NVIDIA reaches $186 million. However, the filing did not disclose the actual premiums paid for the options, the strike prices, or the expiration dates.

This bet faces significant paper losses. As of the benchmark date of the 13F filing on September 30, both stocks have risen sharply, indicating that Burry's short positions have suffered substantial losses unless he has closed them to stop losses. Whether his aggressive shorting strategy can replicate the success of the 2008 subprime mortgage crisis remains in doubt.

Concentrated Shorting of AI Leaders

According to the holdings document from Scion Asset Management, its portfolio shows a clear divergence. One part consists of smaller traditional holdings, including companies like Bruker, Lululemon, SLM, and Molina Healthcare.

The other half is entirely composed of options, with the most notable being the put options against Palantir and NVIDIA. These two bets occupy the vast majority of its portfolio, indicating that Burry is concentrating his firepower on shorting what he perceives as the "AI bubble."It is worth noting that the document did not disclose the actual purchase cost, exercise price, or expiration date of these options, as these key details will determine the final profit and loss of the transaction.

Burry's strategy is reminiscent of his famous move before the subprime mortgage crisis. At that time, he accurately shorted the U.S. real estate market using credit default swaps (CDS). Today, he is once again targeting assets seen as synonymous with "market frenzy," attempting to replicate the success of that time.

After publicly issuing a bubble warning, Burry demonstrated his viewpoint through action, which some market observers interpreted as a top signal. He is trying to "hit a home run on the fence of the bubble," just as he did back then.

Timing of the Bet Remains Key

Although Burry's short-selling actions have attracted market attention, investors should remain cautious. Historical experience shows that even if the directional judgment is correct, timing is crucial.

Looking back at the trading before the 2008 financial crisis, Burry actually established his short positions about two years in advance. Although he ultimately achieved great success, the high costs of maintaining CDS positions during this period once brought him to the brink of disaster. Entering too early can lead to significant holding costs and pressure.

Moreover, Burry's timing judgments in recent years have not always been accurate. For example, in January 2023, he warned of market risks with the word "Sell," but the market subsequently experienced a strong rebound. This short-selling also faces similar challenges; since the disclosure of the document on September 30, the stock price movements of Palantir and NVIDIA have put his short positions in a state of unrealized loss.