Famed investor Michael Burry, the hedge fund manager who predicted and profited from the US housing sector collapse during the 2008 financial crisis, has drawn attention over recent months for his firm bear position on artificial intelligence (AI) led technology stocks, including market darling Nvidia.
Now, Burry has revealed his latest move — betting against Oracle Corporation, the company which made founder and Chief Technology Officer (CTO) Larry Ellison, the fifth richest man in the world amid the AI boom.
Michael Burry owns puts options on Oracle shares
In his paid newsletter ‘Cassandra Unchained’ (that Burry said he is focusing on after shutting down Scion Asset Management in early November), the ace investor said he owns put options in Oracle Corp., Bloomberg reported on 10 January.
The post was made after market hours on Friday (9 January), the report added. The reveal is not shocking given Burry’s very loud bearish stance on the AI-led rally. He is among the market watcher warning of an “AI bubble” due to the circular-feeding structure of AI related companies.
In November, before he shut down his asset management firm, Burry also revealed bearish bets on CEO Jensen Huang’s Nvidia and CEO Alex Karp’s Palantir Technologies. Bloomberg reported that his post said he directly shorted Oracle during the last six months.
“I do not like how it is positioned or the investments it is making. It did not need to do what it is doing, and I do not know why it is doing this. Maybe ego,” Burry wrote in response to a reader who asked why he had decided to bet against Nvidia and not Oracle, the report added.
The millionaire investor has not disclosed specifics about the put options.
Oracle stock touches highs on AI, but fell on scepticism
Oracle stock jumped 36% in a single session in September after it issued a bullish forecast for its cloud business tied to surge in demand for AI. But it finished the year about 40% below its September peak amid rising capex, questions over some of the cloud deals and a swelling debt load linked to data-center expansion, the report said.
Oracle has about $95 billion of debt outstanding, making it the biggest corporate issuer outside the financial sector in the Bloomberg high-grade index, the report said, adding that the tech major did not respond to queries outside of business hours.
Michael Burry not sweet on AI stocks — Here’s why
Tech stocks that extend beyond AI, such as Alphabet (Google parent), Meta Platforms and Microsoft Corp. have not been shorted by Burry, he said.
The Bloomberg report quoted him explaining in his blog, “If I short Meta, I’m also shorting its social media and advertising dominance. If I short Alphabet, I’m shorting Google Search in all its forms, Android, Waymo, etc. If I short Microsoft, I’m shorting a global office productivity SaaS goliath. The big ones are not pure shorts on AI.”
According to Burry, companies that extend beyond AI are likely to curb spends in the sector over time, will absorb losses from overbuilt capacity and potentially write down assets, while remaining dominant in their core businesses. “These three will not go away,” he added.
On OpenAI, he said that he is ready to short the Sam Altman-led firm at a $500 billion valuation. He also described Nvidia as the most concentrated way to express a bearish view on AI. “Nvidia also is the most loved, and least doubted. So shorting it is cheap, and its puts are cheaper than some of the other big shorts out there that are more doubted,” he added.
(With inputs from Bloomberg)
Key Takeaways
- Investor Michael Burry’s bearish outlook on Oracle reflects his concerns about overvaluation in AI-related tech stocks.
- His strategy includes shorting Oracle due to its high debt and questionable investments.
- On other tech stocks, Burry believes companies that extend beyond AI are likely to curb spends in the sector over time.
