AI Bubble Fears Deepen as Michael Burry’s $1.1B Short Targets Nvidia and Palantir
Global markets tumble amid AI Bubble fears as Michael Burry’s $1.1B short against Nvidia and Palantir sparks investor panic and tech stock selloff.
AI Bubble Sparks Global Market Turmoil
The global stock markets are reeling amid intensifying fears of an AI Bubble, following hedge fund manager Michael Burry’s massive $1.1 billion short position against leading artificial intelligence stocks.
The move, targeting Nvidia and Palantir, has amplified investor anxiety that the AI Bubble may finally be bursting, triggering widespread selloffs across major global exchanges.
The Nasdaq 100 fell sharply by 2%, signaling deeper volatility ahead. Asian markets mirrored the panic — Japan’s Nikkei 225 lost 2.5%, while South Korea’s Kospi dropped nearly 3%. Semiconductor giants like Taiwan Semiconductor Manufacturing Company fell 3%, and Samsung Electronics and SK Hynix saw dramatic declines of 8% and 9%, respectively. In total, nearly $500 billion in market value evaporated in just 48 hours, underscoring growing concerns about inflated AI valuations.
Michael Burry’s Bold Bet Against the AI Bubble
Michael Burry, famed for predicting the 2008 housing market collapse portrayed in The Big Short, is once again making headlines. His hedge fund, Scion Asset Management, has reportedly taken substantial put options — $912 million against Palantir and $187.6 million against Nvidia — signaling his conviction that the AI Bubble is unsustainable.
Burry’s warning comes amid a period of euphoric valuations. Despite Palantir’s strong Q3 earnings — revenues rose 63% to $1.2 billion — its stock tumbled 8% during trading and continued to fall in after-hours sessions. Nvidia, which recently hit a record-breaking $5 trillion market capitalization, also saw its shares decline by 4%, adding weight to fears of an AI Bubble burst.
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Palantir CEO Dismisses the AI Bubble Fears
Palantir CEO Alex Karp struck back at Burry’s bearish stance, calling his short position “batshit crazy.” In a CNBC interview, Karp argued that betting against companies leading the AI transformation defies logic. “The idea that chips and ontology is what you want to short is bats— crazy,” Karp said, emphasizing Palantir’s strong fundamentals amid the ongoing AI revolution.
However, market analysts suggest that even if Burry’s trades are temporarily in the red, his skepticism about an AI Bubble may prove prescient if current valuations fail to align with sustainable profits.
Valuations Mirror Dot-Com Era Exuberance
The mounting concern revolves around extreme valuations in the AI sector. Palantir trades at over 300 times its projected 2025 earnings, a multiple reminiscent of the late 1990s dot-com bubble. Similarly, Nvidia’s price-to-earnings ratios and market concentration within the so-called “Magnificent 7” tech stocks have triggered alarms across Wall Street.
The S&P 500’s forward P/E ratio, now above 23, reinforces fears that the AI Bubble extends beyond tech, inflating the broader market. Analysts warn that if AI-driven gains fail to translate into real-world profits, a major correction could be imminent.
Global Experts Warn of Market Correction
Top Wall Street figures have echoed these warnings. At a recent Hong Kong investment forum, Goldman Sachs CEO David Solomon and Morgan Stanley CEO Ted Pick both forecast potential corrections of 10% to 20% in the near term. Jon Withaar of Pictet Asset Management attributed the latest selloff to “positioning-driven” dynamics — with top-performing AI stocks taking the hardest hits.
Even Bitcoin, often seen as an alternative asset, briefly dipped below $100,000 before rebounding, showing that the fear of an AI Bubble is spilling over into multiple asset classes.
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Is the AI Bubble About to Burst?
The current market turmoil raises a pivotal question: is the AI Bubble finally reaching its breaking point, or is this a healthy recalibration after months of overheated growth? While artificial intelligence remains a transformative force reshaping industries, market fundamentals and investor sentiment appear increasingly disconnected.
The coming weeks will reveal whether Burry’s contrarian bet becomes another legendary success story or a costly miscalculation. For now, the AI Bubble remains one of the most closely watched economic narratives of the year, with its ripple effects likely to shape global investment strategies well into 2026.