"I may be early, but I'm not wrong!" The Big Short Michael Burry once again goes against the market, shorting AI giants Nvidia and Palantir.

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The real-life inspiration for the film "The Big Short," Michael Burry, is once again standing in opposition to Wall Street’s mainstream consensus. This time, his targets are the two AI titans supporting the US stock bull market—NVIDIA and Palantir. Burry firmly believes that the market has detached from reality and that the AI industry is forming a massive bubble reminiscent of the internet bubble. He has positioned bearish bets via the options market, attempting to profit from declines in the share prices of these two tech giants.

This investor, who accurately predicted the subprime mortgage crisis, has significantly escalated his debate with the world’s most valuable companies recently. Not only did Burry publicly disclose his short positions, he fiercely criticized an internal memo released by NVIDIA in response to doubts, calling the document "full of straw man arguments" and "reading like a scam." He bluntly pointed out that the real risk is being concealed—with the rapid acceleration of technological iteration, NVIDIA's clients face future asset write-down risks due to massive capital expenditures.

According to disclosures on November 3, Burry is shorting these two companies by buying put options, the current cost of those bets being about $10 million. If the market crashes as he predicts, the potential return on this investment could exceed $1 billion.

"It’s just like in the movie," Burry quoted his line from "The Big Short": “I may be early, but I’m not wrong.” He admits he had previous cases of entering too early during the internet and real estate bubbles, but believes the current AI craze is much like the "data transmission bubble" back then. He is currently explaining this grand narrative to investors via his newly launched newsletter "Cassandra Unchained," warning that the bursting of the bubble is only a matter of time.

Head-to-head: The Memo Dispute and “Straw Man”

The focus of the dispute between both sides has shifted from simple valuation issues to the deeper logic of accounting practices and technological iteration. According to a previous Wallstreetcn article, in response to doubts, NVIDIA recently distributed a seven-page memo to analysts highlighting the soundness of its business and transparency of its financial reports, denying allegations of “circular financing” and accounting fraud. NVIDIA argued in the memo that its clients typically set the depreciation period for GPUs at 4 to 6 years, in line with the actual lifespan of the equipment.

However, Burry is not buying it. He refuted the points on Substack, saying NVIDIA’s response was a “disappointing” “straw man argument”—attacking views that were not actually raised. Burry pointed out that as a chip design company, NVIDIA’s own depreciation policy is irrelevant; his main concern is with their clients (such as Microsoft, Meta, and other hyperscale data centers).

Burry warned that for the sake of beautifying short-term profits, NVIDIA’s clients extend the accounting lifespan of chips to 5 or 6 years. But in reality, with the rapid iteration of AI tech, new chips could make current hardware obsolete as soon as 2026 to 2028. He cited Microsoft CEO Satya Nadella’s comments on slowing data center construction as evidence, pointing out that overbuilding and technological iteration would lead to massive asset write-down risks in the future.

Simplify Asset Management chief strategist Michael Green pointed out that Burry's historical biggest problem is often “being too early”; whether it was the internet or real estate bubble, he suffered huge pressure from entering too soon. Burry responded by quoting a line from Christian Bale’s character in the film “The Big Short” on social media X:

“It looks like this is going to pay off. I may be early, but I’m not wrong.”

The Specific Short Logic for NVIDIA and Palantir

Burry stated on Michael Lewis’s podcast that NVIDIA and Palantir are “the two luckiest companies on earth,” but his logic for shorting them differs slightly and yet is interconnected.

For Palantir, Burry thinks the company is overly dependent on stingy government contracts and gives executives excessively generous pay. He also points out Palantir is now facing fierce competition from rivals like International Business Machines.

For NVIDIA, the world’s most valuable company, Burry’s concerns center on its client relations and accounting issues. He points out complicated problems between NVIDIA and clients like Oracle and Meta. Burry accuses NVIDIA of propping up sales by financing customers’ purchases of its products, likening this practice to Enron’s financial support of vendors to buy its products back in the day. He warns that once the bubble bursts, a chain reaction of falling profits, shrinking share prices, and reduced investment will severely impact NVIDIA’s future sales.

Track Record and Market Skepticism

Although Burry's performance during the 2008 financial crisis made him famous, not all of his crash predictions over the past 15 years have come true. Social media is full of mockery, joking that he successfully predicted “twenty recessions during the last two slumps.”

On January 31, 2023, Burry posted urging followers to "SELL." Although Silicon Valley Bank collapsed two months later, since then the S&P 500 Index has surged by about 70%. Burry later admitted this call was wrong but defended his record on X, stating that after the collapse of two banks and the market drop, he corrected his view at the bottom and advised buying.

Currently, Burry faces the risk of “being too early” once again. As depicted in “The Big Short,” if he is right about the AI bubble, he will receive massive returns; if his judgment or timing is off, his short positions could become worthless within a few quarters.

Risk Disclosure and DisclaimerThe market carries risks; investments should be made cautiously. This article does not constitute personal investment advice, nor does it consider the individual investment objectives, financial situation, or needs of any user. Readers should determine whether any opinions, views, or conclusions in this article fit their specific situation. Investment decisions made accordingly are at one's own risk. ```