Michael Burry is moving up his timeline for betting against artificial intelligence (AI). The investor, famous for his massive short bet against the U.S. housing market before the global financial crisis, is now converting his heavily weighted short positions in AI-related names into put options, aiming to gain more cost-effective leverage within a shorter time window.
In an investment newsletter published on Monday, Burry wrote: "Fundamentally, I am moving the timeline forward. Therefore, I want my short positions to have more leverage. When the time window better matches expectations, the risk of leverage becomes easier to bear. When it comes to leverage, nothing is more suitable than options — specifically put options here; because volatility indicators such as the VIX are unusually low, these options are relatively cheap." He disclosed that part of the repositioning was to reduce tax liability, but the main reason is his belief that "the AI bubble may burst sooner than expected."
The new put option positions mean he is betting that the AI trade could reverse before next summer. Specifically, Burry swapped his short position in Micron Technology (NASDAQ: MU) for put options expiring in June with strike prices in the $500 range; his short in Nebius (NASDAQ: NBIS) was replaced with June-expiring put options at double-digit strike prices. He also converted his short in the iShares Semiconductor ETF (NASDAQ: SOXX) into put options expiring in September 2027 with strike prices slightly above $400. In addition, he replaced and rolled his short and put options in Palantir (NASDAQ: PLTR) into larger put options, concentrated in September 2027 expiries with strike prices in the low $100s.
Burry cited recent research from Ares Management, which highlighted the AI industry's reliance on unproven revenue that is often locked up by strict legal agreements. The Ares report stated: "It would only take one quarter to break all of this: AI revenue fails to deliver on the expectations supporting its capital expenditure. At that point, the boards of a handful of companies — which already tend to reallocate capital to their highest-conviction bets — would only need to determine that the highest-conviction bet has shifted. The legal documents have long left room for such a decision."
Burry's latest portfolio adjustments indicate his bearish sentiment toward the AI sector continues to intensify. Previously, he had already increased his short positions in Micron, Nebius, and SOXX. He also cited the views of Acer CEO Jason Chen. Chen believes that as China's production capacity continues to increase, the cyclical dynamics of the memory chip industry will return. "How can supply remain persistently short? China's capacity has been increasing all along; there is no shortage problem at all. Contract prices are currently fluctuating at high levels, with some products rising in price and others falling."
Burry has maintained a bearish stance throughout this year, but the market has not cooperated. In May, he said the current stock market atmosphere was "like the final phase of the 1999-2000 internet bubble." The Nasdaq Composite Index still set a record close last week. However, many tech stocks have already moved well off their highs: Micron is 16% below its record high, and Palantir is about 10% below its all-time high.
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