Investor in the "Downgrade Game" bet against Nvidia and Palantir

Michael Burry's hedge fund Scion Capital may have made large bets on the fall of Nvidia and Palantir shares in the third quarter, according to its report. The famous financier, who predicted the 2008 mortgage crisis, has hinted that a bubble is forming in the AI market: companies are actively investing in each other, creating the illusion of growth. Wall Street analysts remain optimistic about Nvidia and maintain a buy recommendation on its stock. They look at Palantir's prospects with caution, despite its strong third-quarter report.

Financier Michael Burry, the prototypical character from the book and movie "The Downgrade," made big bets on the falling stock of AI chip maker Nvidia and military and civilian AI solutions developer Palantir Technologies, MarketWatch wrote . The hedge fund Scion Asset Management, managed by Burry, bought put options that generate profits when the securities get cheaper. It added such contracts to its portfolio on 5 million Palantir securities worth $912 million and 1 million shares of Nvidia stock worth about $187 million, according to a report on Form 13F for the third quarter of 2025 filed with the Securities and Exchange Commission.

Those two short positions now make up about 80% of Scion's portfolio, indicating Burry's big bet on cooling the hype around AI, MarketWatch writes . The report reflects the portfolio's structure at the end of the third quarter; the current allocation may differ.

Burry also emphasized his distrust of the AI boom in a new post on social network X, showing graphs illustrating the slowdown in cloud revenue growth and overheated investment in the technology sector. Separately, he drew attention to "closed investment cycles" within the AI sector, where companies are actively investing in each other, creating the illusion of unlimited growth, MarketWatch writes .

Last week, Burry hinted on his page that there could be a bubble in the market, adding that "sometimes the only winning move is not to get in the game." His bets against AI companies show that he has decided to start a new downside play after all, MarketWatch believes .

As Bloomberg notes , it's impossible to tell from the Form 13F whether it's a pure down play or part of a more complex options strategy because the report doesn't reflect possible counter trades or contract terms. That said, when Burry bought put options on Nvidia securities in the first quarter, the report said they "may serve as a hedge on long positions that are not subject to disclosure." There is no such clarification in the third-quarter form.

Nvidia has gained 54% since the start of the year, extending a three-year run of gains fueled by strong demand for AI hardware. The company's shares lost 1.8% in trading on Nov. 4.

Analysts remain optimistic about the chipmaker. On Nov. 3, Loop Capital raised its target price from $250 to $350, expecting the stock to rise nearly 75%. Analyst Ananda Barua noted that the company is likely to double its GPU shipments in the next 12-15 months. Analysts at Rosenblatt Securities raised their target from $215 to $240 and reiterated their recommendation to buy the company's securities ahead of its third-quarter report on Nov. 19, Investor's Business Daily wrote .

Palantir Technologies has posted 174% year-to-date growth. On November 4, its shares collapsed by 7.7% despite the publication of strong quarterly reports with record financial results.

Investors and analysts are concerned about the company's inflated valuations, as well as its dependence on government contracts amid the U.S. government shutdown. According to FactSet, only 24% of Wall Street experts recommend buying Palantir shares, MarketWatch writes . Most have a neutral rating.

Burry also bought call options on shares of oilfield services company Halliburton and pharma giant Pfizer in the third quarter. He also increased his stake in sportswear retailer Lululemon and bought securities in scientific equipment maker Bruker, lender SLM Corp and insurance company Molina Healthcare. The latter now makes up Scion's largest long position, the report shows.

The fund got rid of shares of insurer UnitedHealth and cosmetics company Estee Lauder, which was Burry's only long position at the end of the first quarter; he sold off all other securities at the time.

This article was AI-translated and verified by a human editor