Burry Shortens AI Bubble Timeline After Weekend Analysis

Michael Burry has moved from short stock positions to put options. A weekend of research, he explained, led him to believe the artificial intelligence bubble could pop earlier than expected.

The investor known for the Big Short revealed the adjustments in a Monday post on his Substack, Cassandra Unchained. The changes involve Micron, Nebius, Nvidia, Palantir, and a semiconductor ETF.

Burry Shifts From Short Positions to Put Options

A short seller borrows shares and sells them with the hope of buying them back at a lower price, without a fixed end date. A put option provides the right to sell a stock at a predetermined price, but only until the contract expires. Puts increase in value as a stock declines, and the buyer's maximum loss 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.

Burry closed out his short positions in Micron, Nebius, Caterpillar, CoreWeave, Nvidia, Palantir, Oracle, and the iShares Semiconductor ETF (SOXX). In his post, he stated that puts have fully replaced these holdings, although he has not yet found CoreWeave puts at a favorable price.

The puts on Micron and Nebius expire in June. Those on Nvidia, Palantir, and SOXX are set to expire in September 2027.

Burry noted that put options appear inexpensive because the Cboe Volatility Index (VIX) and similar measures are unusually compressed. He also initiated a new short position on MetLife using long-dated puts. The move came one week after Burry identified a copper miner as an indirect AI investment.

Research Prompts Burry to Move Up AI Burst Timeline

Back in August, Burry had pegged 2028 as the base case for when the AI bubble would burst. He also cautioned that major market cycles can take months or even years to reverse.

Tax-loss harvesting played a role in the shift, according to Burry. But he said weekend research was the main driver, leaving him convinced that “the bubble in AI may burst sooner than later.”

Burry referenced a report by Ares Management. The report contends that the AI boom depends on ongoing capital expenditure and on revenue that has yet to be proven.

“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 states.

So far, markets have not moved in Burry's favor. The Nasdaq Composite hit a record close last week. Nvidia CEO Jensen Huang stated that AI has entered a high production ramp.

Nonetheless, several of Burry's target stocks are trading below their highs. Micron is 16% below its peak, and Palantir is roughly 10% off its own record.

The June expiration dates on his Micron and Nebius puts will serve as the first gauge of his shorter outlook.