Dr. Michael Burry, a man of “The Big Short” fame, has a lot of courage to bet against a high-flying company like Nvidia (NASDAQ:NVDA | NVDA Price Prediction), which has always found a way to skyrocket higher, even after nail-biting periods of concern. While buying put options is probably less risky than shorting the stock, given shorts carry the potential for uncapped losses if things go wrong and shares continue to blast off in short order, leaving little time to cover one’s position, there’s still the timing aspect to get right.
Burry likely knows better than anyone about the value of getting the timing right, as well as having the correct thesis. Either way, whenever Burry makes a move, shareholders of the company he’s betting against should take notice. And given how Nvidia is now the largest company on the planet, with a market cap currently just north of $4.7 trillion, the average index investor is likely already much exposed to the GPU maker, whether they like it or not.
Dr. Burry has been a bear on the semis and red-hot AI plays for some time. But will he get the timing right this time?
The concentration risks with the S&P 500 (and especially the Nasdaq 100) have been known for quite some time amid the Magnificent Seven’s impressive multi-year ascent. However, if Burry is right and profitable with his latest put options on Nvidia, the ripples across the broad stock market are sure to be felt by many, even those who aren’t overweight the AI chip giant. Of course, this isn’t the first time that Dr. Burry has bet against the AI chip trade. As you may remember, Burry bet against the iShares Semiconductor ETF (NYSEARCA:SOXX) way back in 2023.
If you treated such a bold bet as the top for the semis, you missed out on significant gains that followed. Of course, there were bumps along the way, but if you defied the great Burry, you did well, as he eventually covered his position. As it turned out, Burry got the timing wrong, but he may still have been right about the overvaluation in the semiconductor space.
Perhaps if Burry had entered the trade a few quarters later, he would have done well as the iShares Semiconductor ETF eventually plunged close to 36% from peak to trough in the second half of 2024 and the first half of 2025. In any case, you just knew that Burry would be back at some point later on.
Burry is back, and he might be right this time around as AI bubble fears rise
Fast forward to today, and Burry is back with a bold bet against two stocks that have doubled up many times over in just a few short years. While I do believe Nvidia will continue to be a dominant player in AI chips, especially as it looks to incorporate some quantum innovation as well with NVQLink, I do think it’s going to be so much harder to keep up the pace of gains.
And while there’s a chance that Burry will be wrong again, as he was with his bet against the broader semiconductor industry just a few years ago, I also think the stakes are as high as ever for Nvidia. Shares have soared over 1,200% in the past five years, and while Nvidia itself might not be a bubble, its stock chart alone certainly does look like one.
Wall Street expects big things from Nvidia stock in the new year
Looking ahead, Wall Street seems to expect big things from Nvidia as it readies its next-generation chips. In fact, the biggest bull on Wall Street, Ananda Baruah of Loop Capital Markets, thinks the stock could be on its way to $350 per share, as a “golden wave” of AI adoption hits. Even if such a wave hits, I’m not even sure if the stock will nudge higher anymore, especially as growing skepticism about AI intensifies into the next year. And as AI bubble fears mount, perhaps skyrocketing GPU shipments won’t lead to a skyrocketing stock.
Either way, if Loop Capital is proven right, the coming wave might just wipe out Burry’s bearish bet and cause him to cover at a loss. Either way, I don’t think it’s a good idea to chase the stock right here with expectations that it’ll surge 80% over the year ahead. There are a lot of risks, and going against Burry is not something I’d venture to do, especially given the cyclical nature of the semis.
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