"Big Short" investor's challenge signals shift in Wall Street's AI romance
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Illustration: Sarah Grillo/Axios
Short selling rarely thrives in a bull market, especially one this undeterred. Still, some executives lash out at investors who bet against them, like Palantir CEO Alex Karp, who called investor Michael Burry "bats**t crazy" on CNBC for shorting his stock.
Why it matters: Wall Street can't stop talking about the risks of an AI bubble, yet investment bets that the bubble will deflate or burst haven't gained much traction. That could be changing.
By the numbers: Scion Asset Management, Burry's firm, disclosed put-option positions worth roughly $912 million against Palantir and $187 million against Nvidia in its latest 13F filing.
- Together, those short bets make up nearly 80% of his portfolio, a massive wager that the AI boom is overcooked.
Catch up quick: Burry made his money with a contrarian bet against subprime mortgages before the financial crisis erupted.
- That move made him famous via the Michael Lewis book "The Big Short" and subsequent movie.
- Retail investors track Burry's investments and copy them feverishly via Reddit threads and Discord chats.
- That's important for a company like Palantir: Roughly half its shares are owned by individual investors, aka, retail.
State of play: It's not just about Burry vs. Karp. There's been a recent rally into "smaller, weaker balance sheet, high short interest and unprofitable stocks" according to a recent note from Stuart Kaiser, head of U.S. equity trading strategy at Citi.
- AppLovin CEO Adam Foroughi slammed short-seller reports as "littered with inaccuracies." The Securities and Exchange Commission has since been investigating the company's data-collection practices, Bloomberg reported.
- GameStop CEO Ryan Cohen has said it's "un-American to bet against business," but also said it's a free market in July.
Zoom out: Executives may publicly rebuff short sellers, but they tend to follow their advice according to one research paper showing insider share selling increases after companies blame short sellers.
The bottom line: Short selling is not a popular bet when the market is up 90% from its fall 2022 lows.
