Michael Burry has replaced several short stock positions with put options after new research led him to move forward his timeline for a potential artificial intelligence bubble reversal.
Key Points:
- Burry replaced shorts in several AI-linked stocks and a semiconductor ETF with put options, seeking more leverage as he shortened his timeline.
- His Micron and Nebius puts expire in June, while Nvidia, Palantir and SOXX contracts run through September 2027.
- Burry previously viewed 2028 as his base case for an AI bubble reversal but now says it could happen sooner.
Burry AI Puts
The investor disclosed the changes Monday in his Cassandra Unchained Substack newsletter, saying he covered shorts in Micron, Nebius, Caterpillar, CoreWeave, Nvidia, Palantir, Oracle and the iShares Semiconductor ETF. He replaced the positions with puts, except for CoreWeave, where he said he had not found contracts at an attractive price.
A put option gives its holder the right to sell an asset at a set price before expiration, allowing traders to position for declines while limiting the buyer's maximum loss to the premium paid.
“Fundamentally, I am moving timelines up. As such, I want more leverage in my short positions. Better timelines make leverage more palatable,” Burry said.
His Micron and Nebius puts expire in June, while his Nvidia, Palantir and SOXX contracts expire in September 2027. Burry also opened a new bearish position in MetLife using long-dated puts, and said low volatility made the options relatively inexpensive.
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AI Bubble Timeline
Burry said tax-loss harvesting partly influenced the portfolio changes, but research conducted over the weekend was the main reason he shortened his timeline. In August, he had identified 2028 as his base case for the AI bubble, while warning that major market cycles can take months or years to unwind.
He cited a report from Ares Management that questioned whether AI investment can continue if revenue fails to justify heavy capital spending. The report said boards could redirect capital if returns from AI infrastructure disappoint the assumptions supporting current investment.
“It would take only a season in which AI revenue disappoints the capital expenditure underwriting it,” the Ares report said, adding that corporate boards could then reconsider where they deploy capital.
Markets have not yet validated Burry's bearish positioning. The Nasdaq Composite closed at a record last week, while Nvidia CEO Jensen Huang has said AI is entering a high production ramp, although Micron remains 16% below its record and Palantir is about 10% below its peak.
The shift marks a notable change from Burry's August outlook because his June Micron and Nebius contracts now put a defined expiration date on part of the trade. His earlier 2028 base case allowed substantially more time for AI spending, revenue expectations and equity valuations to change.
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