"Big Short" Michael Burry bought Nvidia call options to "hedge" his position while simultaneously increasing his short selling.

On the eve of Nvidia's earnings report, long-time bearish investor Michael Burry made a rare move by buying call options on the stock, but he made it clear that this was just a "hedge" and his bearish stance remained unchanged.

According to a StockTwits report on the 27th, Burry disclosed on the social media platform Substack that he had purchased Nvidia call options expiring in December with a strike price in the mid-to-high range of $200, and characterized the position as a tool to hedge his large short exposure.

At the same time, he further increased his short positions in Nvidia, Oracle, Palantir, Nebius, and Caterpillar, and his short equity positions (excluding put options) now exceed 21% of his overall portfolio.

This contradictory move reflects Burry's core assessment of Nvidia: its short-term performance is unpredictable, but its long-term valuation is far below its current market price. He had previously stated publicly that Nvidia's monopoly advantage is waning, its capital expenditure expansion will squeeze shareholder returns, and he compared the company's current AI expansion to the Enron financial scandal in 2001, warning that its potential harm to the economy and investors is "orders of magnitude greater."

Call Options: Hedging, Not Going Long

Burry stated that the premium he paid for the December Nvidia options was "completely offset by his short position," emphasizing that "I'm not here to make a profit," and he wouldn't have made the trade without such a large short and put option position. This call option position represents approximately 3.5% to 4% of his portfolio.

He admitted that he has historically used this strategy around short positions before earnings reports, but acknowledged that "his past record is not good." He also pointed out that Nvidia's stock price has "fallen more than it rose" after recent earnings reports, and the upcoming earnings results are "just a coin toss." "The market doesn't believe it," he wrote, "and today might temporarily rebuild confidence, but only temporarily."

Valuation rationale: Monopoly advantage is nearing its end, and profitability faces challenges.

Although Burry acknowledges that Nvidia appears to be "significantly undervalued" due to its seemingly low price-to-earnings ratio and monopolistic pricing power, he believes this appearance is misleading.

His core argument is that Nvidia's monopoly will last shorter than the market expects, leading to a decline in profit margins; the company "will not distribute sufficient returns to shareholders," and capital will flow more towards capital expenditures and diversified investments; and its continued investment "near and through the top of the bubble" may lead to a "stunning decline" in profits in the "not-too-distant future."

He compared Nvidia's AI expansion to Enron's financing structure , and previously pointed out in a Substack article that in the current AI infrastructure investment boom, a large amount of capital expenditure has not corresponded to real end-user demand, but rather is self-circulating through opaque financing structures, posing a systemic risk of overestimation.

Short positions expanded across the board, exceeding 21% of the portfolio.

While expanding his short positions in Nvidia, Burry also increased his short positions in Oracle, Palantir, Nebius, and Caterpillar this week. His short equity positions (excluding put options) now exceed 21% of his overall portfolio.

At the same time, he was also accumulating positions in the long direction. He added to his Birkenstock (BIRK) position at a mid-range price of $30, stating that he had completed his full position; he added to his Freddie Mac (FMCC) position at a mid-range price of $5, and stated that he held a large position in Fannie Mae.

Looking at a longer timeframe, Burry's long-short strategy this year has faced significant market pressure. So far, Nvidia, which he shorted, has risen over 12% year-to-date, while Nebius has surged over 150%; conversely, Palantir, which he went long on, has fallen nearly 5% year-to-date, and Oracle has dropped over 23%.

Amidst ongoing pressure on the transaction side, its Substack paid subscription newsletter "Cassandra Unchained" has surpassed 300,000 subscribers in just 231 days since its launch. Based on an annual fee of $379, its theoretical annual revenue is approximately $113.7 million, making it another noteworthy revenue stream.

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