Big Short Investor Michael Burry Warns AI Era Is Ending, Shorts Tesla and Nvidia
Key highlights:
- Michael Burry disclosed new short positions against Tesla, Nvidia, among others
- The investor says AI spending and soaring chip stock valuations could mean the end of the boom
- Tesla rallied almost 10% before Burry revealed his short position
- Nvidia still remains one of Burry's bearish bets
Investor Michael Burry has made yet another bold market call on AI stocks. He believes the artificial intelligence boom may be getting too expensive and risky.
The investor revealed new short positions against companies linked to AI, semiconductors, and data centers. This includes positions against Tesla, Nvidia, Caterpillar, Applied Materials, and the iShares Semiconductor ETF (SOXX). His comments come just as AI stocks attract huge investor interest.
Michael Burry increases bearish bets on AI
According to posts shared on his Substack, Burry said investors are ignoring the risks with the huge amount of money flowing into AI projects.
Earlier in the week, South Korean chip giants Samsung and SK Hynix shared plans to invest over $500 billion in a new semiconductor hub. The news lifted chip stocks and the Nasdaq at the time. Burry, however, thinks the rally is just reactionary. He called the surge a warning sign instead of a bull signal.
“The proximate cause of today’s rally is big spending announced out of Korea,” he said. “Well, I see that as the beginning of the end.”
The investor also boosted his bearish position on the semiconductor sector by adjusting put options tied to the SOXX ETF. He said that the semiconductor index is trading at stretched levels compared to historical averages.
According to his analysis, the Philadelphia Semiconductor Index is sitting at one of its highest levels relative to its 200-day moving average since the dot-com era in 2000. He also pointed to a price-to-sales ratio above 16 times as evidence that valuations are bloated.
Tesla and Nvidia are among the key targets
Michael Burry shared that he opened the short position at $416.22 after Tesla rallied. Shares had closed at $379 in the previous trading session before jumping by 10%. This allowed him to enter the trade at a higher price.
He did not reveal the size of the position but said he was comfortable betting against the stock at current levels.
The investor also built on his bearish stance on Nvidia. He had warned initially that some financing structures supporting AI infrastructure spending could bring risks if demand slows.
Meanwhile, the chip giant is still the world's largest company by market value, and its shares are trading about 5% below the level where its earlier short position was made.
In addition to these positions, he made short trades on Caterpillar at $1,060.98 and Applied Materials at $729.40.
Is the AI rally coming to an end?
There are now conversations among experts on the possibility that the bull run may be over. Some argue that the demand for AI computing power remains strong and that businesses are just starting to adopt the technology.
But critics say the rising infrastructure costs are too expensive, which begs the question of whether the companies can generate enough revenue to justify their spending.
There are new developments that have added to these questions. Governments are now exploring building advanced AI models. Then, there are some technology firms that are already introducing lower-cost AI products to reduce these expenses.
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