Michael Burry hedges Nvidia short, questions AI sector

Michael Burry expanded shorts in Nvidia and other AI stocks, hedging with Nvidia calls. He questions Nvidia’s valuation and warns of risks in the AI sector’s high valuations.

Michael Burry has notably increased his short positions in Nvidia, Oracle, Palantir, Nebius, and Caterpillar. These short holdings now make up over 21% of his portfolio, excluding put options. Despite Nvidia's robust financial performance and attractive growth metrics, Burry questions whether the company’s dominance and current valuation can be sustained in the long term. To manage risk rather than speculate on a price rally, Burry purchased December Nvidia call options with strike prices in the mid-to-high $200s, representing about 3.5% to 4% of his portfolio. He emphasizes that these calls serve as a hedge, not a shift from his bearish outlook, and their cost is offset by his short and put positions. Burry warns that the market may be overvaluing companies benefiting from the AI infrastructure surge. He cautions that aggressive capital expenditures in the industry could result in weaker earnings if demand slows.