While the US stock market remains captivated by the AI boom and a structural rally led by the 'Magnificent Seven' after nearly eighteen months, a prominent contrarian investor known for identifying extreme market mispricings is signaling a very different opportunity. Michael Burry, the founder of Scion Asset Management and the real-life inspiration for "The Big Short," issued a sharp critique of the market on social media this past Friday. He bluntly stated that the US equity market is currently in the midst of a profound dislocation. He argues that large, well-established blue-chip companies—characterized by strong owner earnings, low debt, and aggressive share buybacks at low valuations—are being systematically penalized. The culprit, in Burry's view, is the disorderly capital drain and extreme scenario planning driven by the AI narrative.
What is the Market Punishing?
Burry's thesis is built on a value judgment that directly contradicts the prevailing market narrative. While Wall Street's capital is intensely focused on the AI compute and capital expenditure race, traditional industry giants, often seen as 'cash cows,' are experiencing persistent valuation compression. From Burry's perspective, the fundamentals of these companies have not deteriorated—their gross margins remain near historic highs, their debt structures are healthy, and their shareholder return strategies are robust. Yet, in the face of AI-driven capital flows, these very attributes have become a 'non-hot' label. Earlier this week, Burry commented that AI investment is showing signs of excessive resource concentration, warning that extreme capital expenditure could lead to a scenario reminiscent of the dot-com bubble burst.
This is not the first time Burry has expressed caution about an AI bubble. Since late 2025, Scion Asset Management has consistently disclosed put option positions against AI darlings NVIDIA and Palantir, with roughly 80% of the fund's positioning concentrated in shorting these two stocks. His recent move to increase traditional value positions this weekend has made this 'long-short hedge' risk exposure even more asymmetric.
Increasing Stakes in Four 'Deep Value' Picks: The Rationale and Data
The four stocks Burry chose to buy against the prevailing trend—Adobe (ADBE), Alibaba (BABA), PayPal (PYPL), and Veeva (VEEV)—share a common underlying investment logic: to capitalize on pricing dislocation caused by the market's obsession with the AI narrative and short-term company-specific noise, by acquiring discounted assets with high-quality fundamental support. Below is the specific rationale and latest market data for each holding:
Adobe: An 'Irrational Plunge' Following Strong Earnings
The core basis for Burry's increased stake in Adobe is that the market overreacted collectively to the unexpected negative news of the CFO's departure and technical selling pressure, while the company's fundamentals are arguably at their strongest in recent years. He believes Adobe's gross margins are near historic highs, yet its stock price has been unfairly punished in the irrational outflow of capital towards AI. The key contrast lies in the fact that Adobe's reported Q2 FY2026 earnings (ending May) actually exceeded market expectations: revenue reached $6.2 billion, a 12.7% year-over-year increase, marking the highest growth rate since Q2 FY2022; non-GAAP earnings per share also improved year-over-year.
However, following the earnings release, the company's stock price closed down 6.76% on Friday at $204.02, with its market capitalization shrinking to approximately $82.465 billion and its trailing twelve-month P/E ratio falling to about 11.67. The surface catalysts for the sell-off were the CFO's resignation announced on the same day as the earnings report, coupled with broader pressure on the software sector. Yet, in Burry's value assessment framework, this level of short-term disturbance precisely provides a window to acquire a quality asset at a deep discount—a software leader with revenue growth returning to double digits, robust free cash flow, and ongoing commercialization of its generative AI tools (Firefly series), trading at a P/E below 12 times. This pricing, he contends, has clearly detached from its intrinsic value.
Alibaba: China's Most Advanced AI Company Overlooked by the Market
Burry's assessment of Alibaba is particularly straightforward: "In terms of AI strategy, it is the most advanced company in China, and it has been buying back stock. Even though the market hasn't been rewarding that lately, the value continues to grow, benefiting the common shareholder." Burry had previously cleared his portfolio of Chinese tech stocks in an earlier 13F filing but subsequently reversed course to add positions in Alibaba and JD.com. As of the close on June 12, Alibaba stock was trading at $112.82, with a 52-week high of $192.67, a TTM P/E of about 17 times, and a total market cap of approximately $270.67 billion.
Burry's rationale for holding Alibaba includes: first, its Tongyi Qianwen large language model is in a leading position in China's model registration and commercialization efforts; second, Alibaba's ongoing large-scale share buybacks are significantly enhancing intrinsic value per share; and third, the current stock price is far below recent highs, with market pessimism over macroeconomic factors completely overshadowing the company's strategic value in AI infrastructure.
PayPal: A 7-8x P/E Combined with Massive Buybacks
Among Burry's increased positions, the valuation compression for PayPal is the most extreme. As of the June 12 close, PayPal traded at $41.53, with a P/E ratio of only about 7.79 times, a market cap of roughly $36.634 billion, and a 52-week range of $39.90 to $78.22. "At this price, a 7-8 P/E and massive share buybacks are attractive to both private equity and strategic acquirers," Burry wrote on social media.
PayPal has undergone management changes and business strategy adjustments over the past two years, with the market awaiting a 'final performance' breakthrough that has yet to materialize. As the new management team clarifies its product roadmap and profitability remains solid (EPS around $5.38), Burry's judgment is that market pessimism towards PayPal is already fully reflected in its valuation, and any positive strategic catalyst could trigger a significant valuation recovery.
Veeva Systems: The Threat from Salesforce is Overstated
Veeva is a software company providing cloud solutions for the life sciences industry. As of the June 12 close, its stock price was $159.54, with a TTM P/E of about 28.29 times and a market cap of around $25.916 billion. The company reported Q4 FY2025 revenue of $836 million, with TTM revenue reaching $3.19 billion, indicating sustained steady growth.
Burry believes Veeva's stock price has retreated to lows, with both its P/E and price-to-sales ratios well below historical levels. "The threat from Salesforce.com only pertains to a small part of their business and is vastly overblown," he countered, refuting long-standing market concerns that Salesforce.com could erode Veeva's market share.
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