Michael Burry, the investor known for his big short on the U.S. housing market prior to the global financial crisis of 2007–2009, is accelerating his bearish timeline for the artificial intelligence sector. In a newsletter published Monday, Burry announced he is shifting from short positions to put options on several key AI stocks, citing expectations that the bubble in AI may burst sooner than later.
Shift to Put Options for Increased Leverage
Burry’s latest strategy involves swapping short positions for put options, a move he says allows for more cost-effective borrowing over a shorter time frame. He noted that exceptionally tight volatility measures, such as the VIX, have made these options relatively inexpensive.
The adjustments to his portfolio include:
- Micron: Replacing his short position with puts expiring in June with a $500 strike price range.
- Nebius: Moving to June expiration puts in the "double digit strike price" range.
- SOXX iShares Semiconductor ETF: Replacing his short with September 2027 puts in the low $400s.
- Palantir: Rolling his existing short and put position into an enlarged put position centered at a September 2027 expiration in the low $100s.
Burry indicated that while some of these adjustments were made to reduce tax liabilities, the primary driver is his conviction that the AI trade could flip by next summer.
Concerns Over Unproven AI Revenues
Burry’s skepticism is reinforced by research from Ares Management, which highlighted the precarity of relying on unproven revenues in the AI space. The report suggests that if AI revenue disappoints the capital expenditure underwriting it, corporate boards may quickly shift their focus to higher-conviction bets. The Ares report says the legal documents contemplate that decision, leaving the sector vulnerable to a sudden downturn.
Industry Cyclicality and Executive Messaging
Beyond financial structures, Burry has questioned the narrative surrounding the AI boom. He cited Acer CEO Jason Chen, who recently stated that cyclicality is returning to the memory chip sector as Chinese production capacity increases. According to Chen, there is absolutely no shortage issue, with contract prices for memory chips currently fluctuating at a high level.
Burry also expressed doubt regarding the recent public calls for a "slowdown" in AI development from leaders at OpenAI, Anthropic, and Google DeepMind. He described these calls as "self-serving," arguing that slowing frontier development benefits whichever companies are already ahead. He further challenged the premise of the current AI hype, asserting that large language models are not artificial intelligence and will never become artificial general intelligence.
Market Context and Future Outlook
Despite Burry’s bearish stance, the broader market has remained resilient, with the Nasdaq Composite closing at a record last week. However, several individual tech stocks remain below their peak valuations. As of recent reporting, Micron trades approximately 16% below its record level, while Palantir remains roughly 10% below its all-time high. Burry continues to maintain that equities were "feeling like the last months of the 1999-2000 bubble" in May.