Nvidia and Palantir have been two prominent names riding the AI investing wave that’s captivated the markets this year. However, questions surrounding valuations exceeding fundamentals are starting to surface. This, in turn, led to famed investor and hedge fund manager Michael Burry announcing short positions on both Nvidia and Palantir. Burry is widely known for his bet against the housing market that eventually collapsed in 2008, which turned into a critically acclaimed book and movie “The Big Short.” Needless to say, Burry knows a bubble when he sees one.
Burry made news this week, disclosing that his hedge fund, Scion Asset Management, is betting against both Nvidia and Palantir. A not-so-cryptic post on X from Burry also surfaced, referencing bubbles — perhaps a reminder to investors to avoid throwing caution to the wind when investing in these big tech AI-focused names?
Burry is not alone in this prediction; other Wall Street executives are also warning of frothy valuations. Amid these cautious outlooks, both Palantir and Nvidia are coming off strong earnings reports that saw each beat analyst expectations. As experienced traders are aware, strong earnings report doesn’t necessarily mean the markets will react positively.
Tail Burry's Bets
Traders who share Burry’s bubble prognostications on Nvidia and Palantir can look to a pair of ETFs: the Direxion Daily NVDA Bear 1X Shares (NVDD ) and the Daily Direxion PLTR Bear 1X Shares (PLTD ). Retail traders can put on their own big short without the use of a margin account. Strategically, tactical traders can also use these inverse ETFs to hedge against current bullish positions for downside risk protection.
Of course, there’s the other side of the trade, where Nvidia and Palantir continue on their upward trajectories. With AI’s growth prospects and their potency as disruptors of industries, some may feel Burry is one the wrong side of that trade. Palantir CEO Alex Karp is one of them.
“The two companies he’s shorting are the ones making all the money, which is super weird,” Karp told CNBC. “The idea that chips and ontology is what you want to short is bats—- crazy.”
“He’s actually putting a short on AI. … It was us and Nvidia,” Karp said further.
With that, traders can lever up their exposure to Nvidia by 200% with the Direxion Daily NVDA Bull 2X Shares (NVDU ) and the Direxion Daily PLTR Bull 2x Shares (PLTU ). Single-stock ETFs can provide profitable opportunities regardless of which directions they go. That gives traders the necessary tools to game the markets effectively and flexibly.
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