Michael Burry, famed for his ‘Big Short’ of 2008, revealed a massive $1 billion bet against artificial intelligence stocks including Nvidia ($NVDA), shocking market watchers. The Big Short investor bets against AI at a time when tech valuations hit historic highs. Is this a prudent warning—or a costly miscalculation?
Burry Shorts Nvidia and AI Stocks as Sector Hits $8 Trillion Market Cap
Securities filings released on November 4, 2025 show that Michael Burry’s Scion Asset Management initiated bearish positions against leading AI stocks. The fund purchased $1.05 billion in put options targeting companies such as Nvidia ($NVDA), whose shares surged 53% year-to-date to $742.88 by the end of October, and Advanced Micro Devices ($AMD), up 34% to $154.03 in the same period. According to Bloomberg, the overall market cap of the AI-driven tech sector crossed $8 trillion in October 2025, with AI companies accounting for 19.6% of the S&P 500’s total value. Burry’s move comes just as the sector marked $900 billion in capital inflows in the first three quarters of 2025 (Refinitiv Eikon).
Why AI Sector Volatility Raises Risks Amid Record Valuations
Burry’s high-profile short appears just as the AI sector faces increasing volatility and concerns about overheated valuations. According to a Goldman Sachs report published in September 2025, core AI stocks trade at a forward P/E average of 41.2—double their 10-year historical mean. This disparity echoes previous bubbles, such as the tech bust of 2000, when sector multiples exceeded long-term earnings growth rates. Recent market data from S&P Dow Jones Indices highlights that daily price swings (close-to-close) for major AI stocks have averaged 2.7% in Q3 2025, up from 1.5% just a year earlier. Yet, strong demand for generative AI applications continues driving revenue growth, with IDC projecting global AI software spending will reach $410 billion in 2026, a 29% CAGR from 2023.
How Investors Should Respond to AI Stock Volatility and Burry’s Short
For investors, Burry’s wager against AI serves as both a caution flag and a strategic signal. Those overweighting high-growth technology stocks like Nvidia ($NVDA), AMD ($AMD), and Alphabet ($GOOGL) should reassess portfolio balance and monitor sector valuation multiples. Defensive positioning—such as diversifying into value or dividend stocks, or using options to hedge downside—can help buffer against sector reversals. However, strong fundamentals and earnings momentum have powered AI leaders’ outperformance—Nvidia’s Q3 2025 revenues jumped 32% year-over-year, according to company filings. For broader diversification strategies, the stock market analysis section reviews historical hedging performance, while the investment strategy resources cover volatility management for tech-heavy portfolios.
What Analysts Expect Amid AI Boom and Short Seller Risks
Industry analysts observe that while short positions against momentum sectors can yield large returns during corrections, timing remains a key challenge. As of November 2025, market consensus suggests the AI sector will remain volatile but supported by strong enterprise adoption and capital investment. Nevertheless, investment strategists warn that macro risks—such as rising interest rates or earnings disappointments—could trigger sharp contractions. According to Morgan Stanley’s September 2025 commentary, “AI valuations may be rich, but unless demand falters, shorts face considerable risk of loss.”
Big Short Investor Bets Against AI: Major Test Looms for Tech Bulls
Michael Burry’s Big Short investor bets against AI just as investor exuberance powers the sector to record highs. The coming quarters will test whether this wager signals an overdue correction or merely marks a contrarian outlier in an ongoing AI boom. For investors, closely tracking sector earnings, policy shifts, and market sentiment remains crucial to navigating the unpredictable path of AI stocks.
Tags: Michael Burry, AI stocks, Nvidia, stock market analysis, tech sector
