Dr. Michael Burry, a man famous for “The Big Short,” has a lot of courage to bet against a high-flying company like NVIDIA (NASDAQ:NVDA), which has always found a way to soar, even after periods of worry. While buying puts is probably less risky than shorting a stock, since short selling carries the potential for unlimited losses if things go wrong and the stock continues to skyrocket in short order, leaving little time to cover the position, there is still the timing aspect to getting it right.
Burry probably knows better than anyone the value of getting the timing right, as well as having the right thesis. Either way, every time Burry makes a move, the shareholders of the company he’s betting against should take notice. And given that Nvidia is now the largest company on the planet, with a market capitalization currently just over $4.7 trillion, the average index investor is likely already heavily exposed to the GPU maker, whether they like it or not.
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Nvidia (NVDA) has risen more than 1,200% over the past five years and now has a market cap of over $4.7 trillion as the largest company in the world.
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Dr. Michael Burry bought puts against Nvidia after his 2023 bet against semiconductors turned out to be ill-timed despite a subsequent 36% correction.
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Loop Capital maintains a $350 price target on Nvidia shares driven by the expected acceleration of AI adoption.
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The concentration risks of the S&P 500 (and especially the Nasdaq 100) have been known for quite some time amid the impressive multi-year rise of the Magnificent Seven. However, if Burry is right and profitable with his latest puts on Nvidia, the repercussions on the broader stock market will surely be felt by many, even those who are not overweight the AI ​​chip giant. Of course, this is not the first time Dr. Burry has bet against the AI ​​chip trade. As you may recall, Burry bet against the iShares Semiconductor ETF (NYSEARCA:SOXX) back in 2023.
If you considered such a bold bet as the best for the semi-finals, you were missing out on the significant profits that followed. Of course, there were obstacles along the way, but if you challenged the great Burry, you did well as he finally covered his position. As it turned out, Burry was wrong in his timing, but he still may have been right about overvaluation in the semiconductor space.