Burry Shorts Nvidia, Palantir, Tesla, Warns of "1987-Type Fall"

Michael Burry became famous for his depiction in The Big Short, and he has now set his sights on artificial intelligence stocks. He is short Nvidia, Palantir and Tesla, and in his Substack newsletter he warned that the AI bubble could lead to a "1987-type fall." His argument centers on leverage: he noted that a rising stock market forces funds like the GraniteShares 2x Long NVDA Daily ETF to buy more shares of Nvidia as the chipmaker rallies, and that total margin debt increased by 50% year over year in June. That kind of leverage accelerates rallies but can lead to harsh, sudden crashes.

The article pushes back on Burry's warning. It points to the liquidation of Leopold Aschenbrenner's highly leveraged Situation Awareness hedge fund, which had high-leverage bets on hot AI stocks and was liquidated almost overnight, catching the world by surprise and explaining why AI stocks had been slumping for weeks. The article argues this margin unwind suggests there won't be a dramatic 1987-style event, and that the AI boom is fueled by real demand, revenue and profits, unlike the dot-com bubble. It also notes Burry's track record: he has repeatedly warned about crashes that never materialized, and when he makes bold bets he often thinks in months rather than years because puts have expiration dates. He disclosed a short position in Nebius Group on Aug. 6, and the stock is up roughly 20% since that disclosure.

The stakes here hinge on whether leverage in the market turns a correction into something worse. For long-term investors, the article suggests a 20% dip is recoverable, but for those using margin or concentrated in growth stocks, the same dip can be devastating. The test is whether the margin debt that rose 50% year over year in June unwinds in an orderly way or forces a broader sell-off.