According to Fortune, Michael Burry’s Scion Asset Management disclosed a $1.1 billion short position against Nvidia and Palantir through an SEC filing. This comes as global markets are experiencing significant selloffs, with tech stocks particularly vulnerable after driving most of the S&P 500’s returns. Bank of America analysts noted tech contributed over 90% of October’s S&P returns, while the Magnificent 7 alone accounted for 80%. Palantir CEO Alex Karp responded angrily, calling the short “batshit crazy” despite his company reporting Q3 revenue of $1.2 billion, up 63% year-over-year. The markets continued falling overnight, with Palantir down another 3% in after-hours trading following yesterday’s broader declines.
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The house of cards
Here’s the thing about this market – it’s basically standing on a handful of tech stocks. And when one of the most famous contrarian investors in history bets against the very companies propping everything up, people notice. The concentration risk is staggering. We’re talking about situations where single stocks are driving half of entire national indexes. Taiwan’s market? One stock responsible for more than 50% of returns. Hong Kong? Six tech stocks driving 50% of performance. It’s like building a skyscraper on toothpicks.
Why this matters
Burry isn’t just some random hedge fund manager making noise. This is the guy who famously predicted and profited from the 2008 financial crisis. So when he puts $1.1 billion on the line betting against the AI darlings, institutional investors pay attention. The timing is particularly interesting given that Palantir just reported crushing earnings expectations with 63% revenue growth. But Burry seems to be looking beyond the growth numbers at the valuation disconnect – Palantir’s $450 billion market cap versus expected annual revenues of only $4.4 billion. That’s a pretty steep multiple, even for a growth story.
The gloves come off
Karp’s reaction was… well, let’s call it passionate. He went on CNBC and didn’t hold back, calling the short “batshit crazy” and promising to “be dancing around when it’s proven wrong.” And you can understand his frustration – his company is delivering massive growth, beating expectations, and some guy who made his name betting against mortgages is now betting against his AI success story. But here’s what’s really interesting: Karp’s argument that “the two companies he’s shorting are the ones making all the money” might actually be Burry’s point. When everyone piles into the same trade, when concentration gets this extreme, that’s exactly when contrarians start looking for the exit.
What happens next
So where does this leave us? We’ve got the CEOs of Goldman Sachs and Morgan Stanley predicting a 10-20% correction. We’ve got markets that are essentially being held up by a handful of tech stocks. And now we’ve got Michael Burry placing one of the most high-profile short bets since 2008. The real question isn’t whether Burry is right or wrong about these specific companies – it’s whether this signals a broader recognition that market concentration has reached dangerous levels. When the music stops, there might not be enough chairs for everyone. And given how much of everyone’s retirement is tied up in these exact stocks, that should make everyone a little nervous.
