Michael Burry has swapped his short stock positions for put options. He said weekend research convinced him the artificial intelligence (AI) bubble may burst sooner rather than later.
The “Big Short” investor disclosed the changes in a Monday post on his Substack newsletter, Cassandra Unchained. The reshuffle covers Micron, Nebius, Nvidia, Palantir, and a semiconductor exchange-traded fund.
Michael Burry Replaces His Short Positions With Puts
A short seller borrows shares and sells them, hoping to buy them back cheaper, with no fixed end date. A put gives the right to sell a stock at a set price, but only until the contract expires. Puts gain value as a stock falls, and the most a buyer can lose is the premium paid.
“Fundamentally, I am moving timelines up. As such, I want more leverage in my short positions. Better timelines make leverage more palatable,” Burry said.
The Big Short investor covered his shorts in Micron, Nebius, Caterpillar, CoreWeave, Nvidia, Palantir, Oracle, and the iShares Semiconductor ETF (SOXX). He wrote in his post that puts now completely replace them, though he has yet to find CoreWeave puts at an attractive price.
His Micron and Nebius puts expire in June. Meanwhile, his Nvidia, Palantir, and SOXX puts run to September 2027.
Burry added that puts look cheap because the Cboe Volatility Index (VIX) and similar gauges remain unusually tight. He also opened a new MetLife short using long-dated puts. The shift came a week after Burry named a copper miner as his indirect AI bet.
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Why Burry Now Sees Less Time on the AI Clock
In August, Burry named 2028 as his base case for the AI bubble. He also warned then that large market cycles can take months or years to unwind.
Burry said tax-loss harvesting accounted for part of the reshuffle. However, he said weekend research drove most of it, leaving him convinced the “bubble in AI may burst sooner than later.”
He cited a report from Ares Management. The report argues that the AI boom relies on continued capital spending and on revenue that remains unproven.
“It would take only a season in which AI revenue disappoints the capital expenditure underwriting it. In that scenario, a handful of boards, predisposed to redeploy capital toward the highest-conviction bet, would simply need to conclude that the highest-conviction bet has shifted. The legal documents contemplate that decision,” the report reads.
However, markets have so far moved against Burry. The Nasdaq Composite closed at a record last week. Nvidia CEO Jensen Huang has also said AI has entered a high production ramp.
Still, some of Burry’s targets trade below their peaks. Micron sits 16% below its record high, while Palantir is about 10% below its own.
The June expiries on his Micron and Nebius puts will be the first test of his shorter timeline.
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Source: BeInCrypto
