Wall Street was painted red with Palantir Technologies plummeting 8% on Tuesday even after posting blockbuster third-quarter earnings. The government-contracted AI software company, which has managed to gain 175% year-to-date, found itself caught in a brutal tech selloff that spared not even chip giant Nvidia, which shed nearly 4% of its value, erasing roughly $200 billion in market capitalisation. The timing couldn't be more bizarre, as just one day earlier, Michael Burry's Scion Asset Management filed its quarterly 13F, 11 days ahead of the November 14th deadline that became the main focus in the investment community due to its heavy bets downward. The filing disclosed massive bearish positions against these two names, with $912 million in put options on Palantir's 5 million shares and $186.5 million against Nvidia's 1 million shares. Market observers say this was the first time Burry had ever filed early, received as an urgency to broadcast his conviction that the AI bubble is about to pop.
Michael Burry needs little introduction to those who lived through the 2008 financial crisis and finance film lovers. The founder of Scion Asset Management, who was played by A-list actor Christian Bale in "The Big Short", earned legendary status by profiting off the subprime mortgage collapse when virtually everyone else was either celebrating the housing boom. Armed with obsessive research and contrarian instincts honed during his earlier career as a neurologist, Burry placed a $1 billion bet against the housing market in 2005, ultimately netting $100 million personally and delivering over $700 million to his investors. Though even legends make mistakes. In January 2023, Burry posted a single ominous word on Twitter: "Sell". He deleted his account the next day, as he had done many times before when his warnings went viral. But this time was different, whereby in March 2023, after markets continued their steady climb, Burry quietly admitted in posts that he "was wrong to say sell." The S&P 500 has since surged 47% from that ill-timed call. Now, after a two-year social media silence, Burry returned on October 31st with a cryptic message: "Sometimes, we see bubbles. Sometimes, there is something to short. The only winning move is not to play. Move along." Days later, his aggressive short positions became public knowledge. Ironically, the market did go through a correction 2 years after the apology, albeit only 20% from the top compared to more than 50% in 2008.
Considering valuation metrics, Federal Reserve policy trajectories, earnings momentum, technical indicators, and historical bubble patterns, the market appears headed for heightened volatility through year-end 2025 and into early 2026. While a 2008-style systemic collapse is not likely, the concentration of gains in a handful of AI-related megacaps has created pockets of extreme vulnerability. Palantir's price-to-sales ratio of 62x and Nvidia's premium valuations suggest that any retraction in AI appraisals could trigger sharp corrections in these names specifically. However, the broader market fundamentals remain supported by healthy corporate earnings, moderating inflation, and Fed rate cuts. The base case scenario projects the S&P 500 trading in a volatile 5,200-5,800 range through mid-2026, with tech investors rotating toward more profitable, reasonably valued names in healthcare, financials, and industrial automation. The key risk remains overly euphoric retail sentiment in AI stocks, ironically the same behavioural pattern Burry exploited in housing two decades ago.
Sources: CNBC, Seeking Alpha, Bloomberg
Photos: Unsplash
