Michael Burry: AI Bubble ‘May Burst’ Sooner Than He First Believed

Michael Burry is pulling his AI bubble timeline forward. The ‘Big Short’ investor said in his Substack newsletter that new research is leading him to think that the bubble in AI may burst sooner than later, and he is repositioning his book to match that shorter horizon.

What Burry actually did

Burry covered his outright shorts and replaced them with put options across a basket of AI-linked names. The Big Short investor covered his shorts in Micron, Nebius, Caterpillar, CoreWeave, Nvidia, Palantir, Oracle, and the iShares Semiconductor ETF (SOXX).

The new put structure is aggressive and near-dated. He swapped his Micron short with puts at a June expiration date and a $500 strike price range. He swapped his Nebius short with puts at the June expiration in the double digit strike price range. And he replaced his SOXX iShares Semiconductor ETF short position with September 2027 puts in the low $400s.

On Palantir, he also replaced and rolled the Palantir short and put position into an enlarged put position centered at a September 2027 expiration in the low $100s.

Why the timeline moved up

Burry pointed to outside research to justify the shift. He cited a report from Ares Management. The report argues that the AI boom relies on continued capital spending and on revenue that remains unproven.

His prior base case had been further out. Burry said he is more confident than ever before that his pessimistic thesis will play out over the next year. He previously said his base case was 2028.

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The leverage angle

Burry was explicit that this is a leverage decision, not just a directional one. Fundamentally, I am moving timelines up, Burry wrote in his Monday investment newsletter. As such, I want more leverage in my short positions. Better timelines make leverage more palatable. Nothing says leverage like options, in this case put options, which are relatively cheap due to exceptionally tight volatility measures such as the VIX.

Translation for traders: he thinks implied vol is underpricing the risk of an AI drawdown into mid-2026, and he is buying that mispricing.

The other side of the trade

Burry has been early, and the tape has punished the bearish call so far. However, markets have so far moved against Burry. The Nasdaq Composite closed at a record last week.

He is not shy about the setup he sees either. Burry said in May that equities were feeling like the last months of the 1999-2000 bubble.

Options market and stocks to watch

Watch these names for flow and skew shifts if Burry’s call gains traction:

• NVDA: The center of the AI capex story. Watch put skew and dealer positioning if capex commentary softens.
• MU: Burry’s June puts sit around the $500 strike. Watch for follow-on put buying into earnings cycles.
• PLTR: Enlarged put position into September 2027 in the low $100s. Watch long-dated put open interest.
• NBIS: Nebius is now a June-dated put target. Watch for unusual activity in double-digit strikes.
• SOXX: The semi ETF is Burry’s broad-based hedge. Watch for institutional hedging into 2027-dated puts.

For more on positioning, capex, and hyperscaler exposure, see other news.

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