Michael Burry, the investor renowned for his successful shorting of the U.S. housing market before its collapse in 2008, has announced a significant shift in strategy. On October 27, 2023, he revealed plans to liquidate his hedge fund, Scion Asset Management, and return capital to investors. This decision comes shortly after Burry placed substantial bets against the share prices of AI chipmaker Nvidia and software company Palantir, valued at over $1 billion.
Burry’s move has sparked widespread speculation regarding the future of his investment strategies, especially in light of ongoing concerns that the AI sector is inflating into a bubble. Despite the tech sector experiencing a selloff earlier in the month, valuations for AI companies have continued to soar. For instance, Nvidia shares have increased by over 37 percent, while Palantir’s stock has surged by an astonishing 126 percent this year, resulting in a price-to-earnings ratio exceeding 200.
In his letter to investors, Burry indicated that he would complete the liquidation process by the end of the calendar year. This correspondence coincided with reports that Scion had deregistered with the U.S. Securities and Exchange Commission (SEC), prompting questions about the fund’s future. Although deregistration does not imply the end of Scion, it does mean that the fund is no longer required to submit regular reports to the regulator.
Burry’s recent actions mirror a trend among other notable short sellers who have also retreated from the market. High-profile investors like Jim Chanos and Nate Anderson have similarly closed their funds amid the persistent hype surrounding AI technologies. Burry commented on his challenges, stating, “My estimation of value in securities is not now, and has not been for some time, in sync with the markets.”
Adding to the confusion surrounding his investment strategy, Burry clarified via Twitter that he had actually spent $9.2 million, not $912 million, in his bet against Palantir. His tweet stated, “Each of those doodads let me sell [Palantir] at $50 in 2027,” suggesting a long-term perspective in his investment approach.
As Burry prepares to liquidate his hedge fund, many questions arise regarding his future direction. In a cryptic message, he hinted at pursuing “much better things” come November 25, without providing further details. Speculation abounds regarding whether he might continue to short the AI bubble independently, potentially shifting to a family office setup to manage his own capital.
Bruno Schneller of Erlen Capital Management suggested that Burry’s next steps may indeed involve operating off the grid for a while. He stated, “Don’t count him out, just expect him to operate off the grid for a while.”
As the AI industry continues to evolve, the implications of Burry’s decisions could reverberate through the financial landscape. Investors and analysts alike will be watching closely to see how this narrative unfolds.
