The New York Stock Exchange. Photo: AFP / Getty Images / Michael M Santiago
In the movie The Big Short, one of the best films about the world of global finance, Michael Burry goes from bank to bank betting against US mortgages.
The bankers can hardly contain their glee as Burry, played by Christian Bale as a heavy metal drumming data savant, places $1.3 billion bets against the booming mortgage market in the form of credit swaps.
The bankers are convinced the mortgage market will continue upward.
Burry is convinced mortgages based on sub-prime loans are about to collapse.
One was right. In 2008, the global financial crisis spread as the US housing bubble burst.
Since the crisis - and the 2015 movie about it - Burry has been a public figure, a person to watch.
Overnight, it was revealed that Burry has effectively just placed a bet against some of the United States' leading AI stocks.
A trader works on the floor of the New York Stock Exchange. (File pic) Photo: AFP / Getty Images / Michael M Santiago
AI and technology stocks have driven a sustained rise in US stock markets since April, now close to record highs, among them chipmaker Nvidia.
There have been worries before that Wall Street is overpriced. This week, Morgan Stanley chief executive Ted Pick warned that the streak could end in a market pull-back.
Late last month, Burry, in his first X post in more than two years, warned of a bubble, fanning investor concerns over inflated spending in the AI and tech industry.
But it has now been revealed in a regulatory filing, that Burry has placed bets on Nvidia and Palantir, an artificial intelligence software company, co-founded by tech entrepreneur Peter Thiel, now a New Zealand citizen.
The practice is known as short selling. Short selling involves borrowing shares and selling them, hoping to buy them back later at a lower price for a profit.
Overnight, Palantir share prices fell around 6 percent despite a strong quarterly update.
The company, which has more than doubled in value this year, forecast its fourth-quarter revenue above market expectations, driven by a rapid AI adoption boosting demand for its data analytics services.
According to Reuters' analysis, Palantir's shares are up more than 170 percent so far this year, after having surged around 1000 percent in the past two years, sharply outpacing Microsoft, Amazon and Alphabet.
Michael Burry Photo: AFP / Getty Images / Astrid Stawiarz
It says Palantir trades at nearly 250 times its 12-month forward earnings estimates, compared to AI chip frontrunner Nvidia's 33 and Microsoft's 29.92.
Palantir's chief executive Alex Karp hit out at short sellers after news of Burry's bet broke.
He told CNBC that short sellers' "behaviour is egregious and I'm going to be dancing around when it's proven wrong".
Of Burry, he told CNBC, "the two companies he's shorting are the ones making all the money, which is super weird. The idea that chips and ontology is what you want to short is bats - crazy."
Burry was not commenting.
Dan Coatsworth, head of markets at AJ Bell told Reuters: "Time will tell if Burry has got his timing right or if the share decline in pre-market trading simply represents a pause for breath before Palantir starts racing higher again."
-RNZ / Reuters
