Big Short star’s $1.5 billion move rattles world

In a move that sent shockwaves through Wall Street, Michael Burry bet heavily against two of the world’s biggest AI firms. Palantir, the powerful data and AI company with deep ties to US national security bodies, is one of them. The other is the biggest company in the world, Nvidia. Mr Burry, who was portrayed by Christian Bale in the 2015 movie The Big Short is well known for spotting market bubbles, and has issued a string of warnings over recent years – some of which haven’t come true. Nevertheless his latest move is sparking concerns of a bubble in the US stock market created by the AI boom that has seen the value of the ‘Magnificent Seven’ companies in the US skyrocket in recent months. Filings show Mr Burry’s hedge fund, Scion Asset Management, disclosed put options worth about US$900 million against Palantir and US$187 million against Nvidia — moves that total more than $1.5 billion in Australian dollars. A put option is a financial bet that pays off if a company’s share price falls. His move sparked an irate reaction from Palantir boss Alex Karp, who said the short sellers were “bat**** crazy” live on CNBC on Tuesday morning. “The two companies he’s shorting are the ones making all the money, which is super weird,” Karp raged on CNBC. “The idea that chips and ontology is what you want to short is bat**** crazy,” he added, referring to Palantir’s data ‘brain’ that links and interprets vast troves of information for its AI systems. He accused short sellers of manipulating the market and said he would be “dancing around” when their bets don’t work out. Mr Burry has not yet spoken about his latest stock market move, but last week he hinted at trouble brewing in a cryptic post on X, writing: “Sometimes, we see bubbles. Sometimes, there is something to do about it. Sometimes, the only winning move is not to play.” “We have seen this movie before,” one analyst said in reference to Burry’s bet and the 2015 film. Palantir shares tumbled almost 9 per cent overnight even though the company obliterated Wall Street forecasts with a 63 per cent surge in quarterly revenue. Nvidia fell 2.5 per cent, a move that wiped $34 billion from its value. Its share price is still up more than 50 per cent this year and it recently became the first company valued at more than $5 trillion. Trouble on Wall St Stock markets around the world fell overnight as investors weighed the recent tech rally on Wall Street against growing fears of an AI bubble and concerns over the US interest-rate outlook. A flood of multibillion-dollar investment into artificial intelligence has been a key driver of the surge in mostly technologyequities across the globe this year, sending valuations to record highs. But there is increasing speculation that tech-led gains may have gone too far and a painful correction could be on the way. “Wall Street CEOs have also put investors on notice for a correction in the next 1-2 years,” said Kathleen Brooks, researchdirector at trading group XTB. “It seems like the investment community has taken heed of this message,” she added. Briefing.com analyst Patrick O’Hare pointed to the more than seven per cent drop in Palantir shares despite the US softwarefirm beating expectations for its third quarter earnings and future guidance. “Palantir, trading at close to 100 times sales, has been a poster child for valuation concerns,” he said. “Accordingly, the weak price action after yet another terrific earnings report has taken some wind out of the market’s sails, acting as a sign to some that this stock and the market-cap-weighted market have gotten ahead of themselves,” he said. In the latest deals, Palantir launched a joint venture with the Dubai government’s investment arm on Tuesday. US chipmaker Nvidia and Deutsche Telekom, meanwhile, said a one-billion-euro ($1.1 billion) industrial artificial intelligencehub would soon be launched in Germany, Europe’s latest bid to catch up in the global AI race. This came a day after ChatGPT-maker OpenAI signed a $38 billion deal with Amazon’s AWS cloud computing arm. Wall Street’s main indices retreated on Tuesday, with the tech-heavy Nasdaq Composite down 1.2 per cent in late morning trading. All the “Magnificent 7” stocks — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla — slid as trading got underwayin New York, though Apple subsequently moved higher during morning trading. In Europe, the Paris and Frankfurt stock markets ended lower. The British pound retreated against the dollar after finance minister Rachel Reeves hinted at tax rises in a pre-budget speech. That helped London’s FTSE 100 index that includes many multinationals whose earnings are inflated by a weak pound, and whichfinished the day slightly higher. The weakness in North America and Europe tracked a weak day in Asia, with Tokyo, Hong Kong and Shanghai stocks falling. Cautious remarks from US Federal Reserve officials did little to provide support for further buying after the central bank’schief, Jerome Powell, indicated last week that a third rate cut this year was not definite. Data on Monday indicated some further weakness in the US economy, with a key gauge of activity in the manufacturing sectorcontracting more than expected and for an eighth straight month in October as demand and output weakened. In company news, shares in British energy giant BP were flat after a drop in oil prices on Tuesday overshadowed its strongearnings report. Crude prices shed around half a per cent as the market anticipated oversupply. “The oil price slid amid ongoing concerns aboutoversupply despite OPEC+’s decision to pause output increases early next year,” said analyst Axel Rudolph at IG trading platform. Meanwhile, here in Australia, the ASX 200 is poised to rise slightly by 0.2 per cent at opening.