Dr. Michael Burry, a man of “The Big Short” fame, has a lot of courage to bet against a high-flying company like Nvidia (NASDAQ:NVDA), which has always found a way to skyrocket higher, even after nail-biting periods of concern. While buying put options is probably less risky than shorting the stock, given shorts carry the potential for uncapped losses if things go wrong and shares continue to blast off in short order, leaving little time to cover one’s position, there’s still the timing aspect to get right.
Burry likely knows better than anyone about the value of getting the timing right, as well as having the correct thesis. Either way, whenever Burry makes a move, shareholders of the company he’s betting against should take notice. And given how Nvidia is now the largest company on the planet, with a market cap currently just north of $4.7 trillion, the average index investor is likely already much exposed to the GPU maker, whether they like it or not.
Nvidia (NVDA) has surged over 1,200% in the past five years and now holds a market cap above $4.7T as the world’s largest company.
Dr. Michael Burry bought put options against Nvidia after his 2023 bet against semiconductors proved poorly timed despite a later 36% correction.
Loop Capital maintains a $350 price target on Nvidia stock driven by expected AI adoption acceleration.
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The concentration risks with the S&P 500 (and especially the Nasdaq 100) have been known for quite some time amid the Magnificent Seven’s impressive multi-year ascent. However, if Burry is right and profitable with his latest put options on Nvidia, the ripples across the broad stock market are sure to be felt by many, even those who aren’t overweight the AI chip giant. Of course, this isn’t the first time that Dr. Burry has bet against the AI chip trade. As you may remember, Burry bet against the iShares Semiconductor ETF (NYSEARCA:SOXX) way back in 2023.
If you treated such a bold bet as the top for the semis, you missed out on significant gains that followed. Of course, there were bumps along the way, but if you defied the great Burry, you did well, as he eventually covered his position. As it turned out, Burry got the timing wrong, but he may still have been right about the overvaluation in the semiconductor space.
