Scion Asset Management Establishes Significant Short Positions Against AI-Centric Equities

Scion Asset Management Establishes Significant Short Positions Against AI-Centric Equities

U.S. equities experienced a downturn on Tuesday, November 5, 2025, following revelations that Michael Burry's Scion Asset Management had taken substantial short positions against leading artificial intelligence (AI) companies Palantir Technologies Inc. (PLTR) and NVIDIA Corp. (NVDA). The news prompted a broad market sell-off, particularly impacting the technology sector, as investors re-evaluated the sustainability of the recent AI-driven rally.

The Event in Detail

Regulatory filings for the quarter ending September 30, 2025, disclosed that Scion Asset Management allocated a significant portion, approximately 80%, of its $1.1 billion portfolio to bearish put options. The firm's largest position involves put options covering 5 million shares of Palantir (PLTR), carrying a notional value of approximately $912 million. A similarly bearish, though smaller, bet was placed on NVIDIA (NVDA), with put options covering 1 million shares, valued at around $187 million. These positions grant Scion the right to sell the respective stocks at predetermined strike prices by a specified expiry date, indicating an expectation of price decline.

Prior to this disclosure, both NVIDIA, a prominent AI-chip manufacturer, and Palantir, an AI-focused software group, had demonstrated considerable market strength. NVIDIA had gained 48% and Palantir a remarkable 305% over the preceding 12 months, with both reaching record highs. However, some market analysts had concurrently raised concerns regarding Palantir's valuation, noting its 2025 price-to-earnings multiple of just over 300, according to FactSet. Beyond these AI-centric shorts, Scion's portfolio also included call options on Pfizer (PFE) valued at $153 million and Halliburton (HAL) at $61.5 million.

Analysis of Market Reaction

The disclosure of Burry's bearish stance immediately impacted the market. Palantir shares declined nearly 8%, while NVIDIA experienced a nearly 4% drop on the day of the news. This ripple effect extended to broader market indices, with the S&P 500 closing down 1.2%, the technology-heavy Nasdaq Composite falling 2%, and the Dow Jones Industrial Average losing 0.5%. Other AI-related stocks, including Oracle Corp. (ORCL) and Advanced Micro Devices, Inc. (AMD), also saw declines of 3.7% each. As of November 5, 2025, NVIDIA stock traded at $195.01, representing a 5.7% decrease over 24 hours, with critical resistance identified between $205 and $210, and immediate support between $185 and $190.

Burry, known for his prescient bet against the 2008 housing market, has previously likened the current AI surge to historical speculative bubbles. His current short positions are rooted in his conviction that the enthusiasm surrounding AI may be outpacing fundamental realities. He draws parallels to the 2000 dot-com bust and the telecom bubble, referencing an "extreme imbalance" where "less than 5 per cent of US telecoms capacity was in use" and "Thousands of miles of expensive fibre optic networks remained 'unlit' beneath the ground." Burry suggests that the massive capital expenditures in AI infrastructure, such as NVIDIA GPUs and cloud data centers, mirror this historical overinvestment. This perspective is reinforced by observations of surging U.S. tech capital expenditure growth reaching levels seen during the 1999-2000 tech bubble, juxtaposed against a reported slowing in year-over-year cloud growth for tech giants like Amazon.com Inc. (AMZN), Alphabet Inc. (GOOGL, GOOG), and Microsoft Corp. (MSFT).

Broader Context & Implications

Michael Burry's history of identifying market excesses lends weight to his current bearish pronouncements. His previous short bet against NVIDIA in the first quarter of 2025, which amounted to $97.5 million and comprised about half his portfolio at the time, saw NVIDIA gain 50% in 2025 and 85% since that trade was revealed. This earlier experience underscores the inherent risks and potential for volatility in high-growth sectors. The current substantial bet, however, signals a reinforced skepticism and could prompt investors to exercise greater caution regarding the AI sector's trajectory. It highlights an ongoing debate among financial professionals: whether the current AI revolution represents a transformative technological shift with sustainable growth or a speculative fervor prone to correction. The substantial valuation of companies like Palantir, despite their recent growth, remains a key point of contention.

Looking Ahead

The market will closely monitor future developments in the AI sector, including forthcoming earnings reports from key players and broader economic indicators that could influence technology spending and investment sentiment. Burry's move may encourage increased scrutiny of AI companies' fundamentals and a greater focus on profitability and sustainable business models over pure growth narratives. The interplay between accelerating tech capital expenditure and potentially slowing cloud service adoption will be a critical metric to watch. Investors will also be keen to observe further disclosures from Scion Asset Management, which could provide additional insights into Burry's evolving market outlook. The coming months will likely see continued re-evaluation of AI valuations as the market processes the implications of such a prominent bearish position.