Michael Burry became famous for betting on the subprime mortgage collapse, which eventually led to actor Christian Bale portraying him in the film The Big Short. Today, Burry has taken on another target in artificial intelligence (AI) stocks, hoping to profit from a plunge in their share prices.
He has been very vocal about his short positions in Nvidia (NASDAQ: NVDA), Micron Technology (NASDAQ: MU), and Palantir Technologies (NASDAQ: PLTR). The question is whether investors should worry or keep holding these stocks.
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Nvidia
Burry’s short thesis on Nvidia essentially centers around the economics of AI infrastructure, and whether the investments from hyperscalers (owners of large data centers) make sense. He believes the real economic life of chips is less than three years, given how fast chip technology is advancing.
However, cloud computing giants Amazon and Alphabet have both recently discussed their chip and networking investment economics. Their customers sign up for deals of five years or more, while Amazon is getting a payback within two to three years and Alphabet is getting a payback within two years — or half that time when it uses its own chips.
Space Exploration Technologies, which is renting out Nvidia graphics processing units (GPUs) for computing capacity on a short-term basis, has been seeing a payback within a year given how constrained capacity is. Meanwhile, according to Bank of America, rental prices for Nvidia’s two-year-old B200 GPUs have been on the rise.
Right now, hyperscalers are seeing strong returns on their AI infrastructure investments, and they show no signs that they will slow their immense spending. If that proves to be the case, Nvidia is going to keep benefiting. It’s a great company with a durable competitive moat, and with the stock trading at a forward price-to-earnings ratio (P/E) for less than 14.5 times fiscal 2028 analyst estimates, I’d be a buyer.
Micron
Burry recently boosted his short position in Micron, and I think his thesis holds more weight than the one for Nvidia. Micron has benefited from a huge surge in demand for high-bandwidth memory (HBM), which gets packaged with GPUs to optimize performance.
However, much of Micron’s growth and margin expansion stems from it actually being a laggard in HBM, as the move of manufacturing capacity toward this high-end memory has left ordinary memory in short supply and prices soaring. As the supply demand of conventional memory becomes more balanced, this will hurt Micron.
