Michael Burry's short bets on Palantir and Nvidia sparked a sell-off in Big Tech. Photo / Getty Images
A months-long rally in Big Tech stocks faltered as artificial intelligence data company Palantir was targeted by a prominent short-seller, sparking invective from CEO Alex Karp and a sell-off on Wall Street.
A Securities and Exchange Commission (SEC) filing covering a period up to September 30 and made public on Monday (local time) showed that Michael Burry’s firm held puts on Nvidia and Palantir (a way to bet that the stock price will fall in the future). Burry’s investment position may have changed and the form doesn’t preclude his having other investments in the artificial intelligence (AI) companies’ stocks.
By late afternoon, Palantir shares had fallen by about 8.9% and Nvidia by about 3.5%.
In a sign of Big Tech’s influence in the broader stock market, the blue-chip S&P 500 was down more than 1%. Some other tech stocks had lost value too, with Oracle and Tesla slipping more than 4%, dragging the tech-centric Nasdaq down 1.9%.
The sell-off was enough to prompt a spirited response from Karp, the Palantir CEO, who blasted Burry and other short-sellers for “trying to call the AI revolution into question” in a CNBC interview on Tuesday (local time).
“It just is super-triggering because these people ... they can pick on any company in the world; they have to pick on the one that actually helps people, that actually has made money for the average person, that is actually helping our war-fighters,” Karp said, gesturing his arms up and down with closed fists and calling Burry “bats*** crazy” for betting against AI.
Burry, an investor whose bet against the US housing market ahead of its 2008 collapse was chronicled in the book and film The Big Short, suggested in a social media post that he wasn’t yet taking a strong financial position on whether the AI boom is a bubble.
“Sometimes, we see bubbles. Sometimes, there is something to do about it. Sometimes, the only winning move is not to play,” Burry said.
In a different post on Tuesday (local time), Burry wrote: “Fake news! I am not 5’6” (not that there is anything wrong with that). And journalists reporting on 13Fs, none more fake.” (A 13F is a quarterly form that hedge funds file with the SEC, disclosing certain positions.)
Burry could not be reached for comment on Tuesday (local time).
His disclosure comes after a strong quarter for Palantir, which has built a niche helping a wide array of companies and government agencies use AI.
In financial results covering the three-month period ending September 30, the company posted a record US$1.18 billion ($2.087b) in revenue, marking a 63% year-over-year increase, alongside a profit margin of 33%.
In a letter to shareholders on Monday (local time), Karp attributed the company’s growth to “voracious” adopters of artificial intelligence in the United States, whose use of AI language models is “reordering human life” through “a ruthless pragmatism”.
“This ascent has confounded most financial analysts and the chattering class, whose frames of reference did not quite anticipate a company of this size and scale growing at such a ferocious and unrelenting rate,” Karp wrote. “Some of our detractors have been left in a kind of deranged and self-destructive befuddlement.”
Both Palantir and Nvidia have been beneficiaries of a historic investment boom around artificial intelligence, with their stock prices surging about 150% and 45%, respectively, since the start of the year.
Some leading investors have warned that the market could be primed for a correction at a time when it is heavily dependent on a few names in Big Tech.
Two leading investment bank CEOs – Ted Pick of Morgan Stanley and David Solomon of Goldman Sachs – said at the Global Financial Leaders’ Investment Summit in Hong Kong overnight that a “drawdown” is likely in the coming years.
“We should also welcome the possibility that there will be ... 10 to 15% drawdowns that are not driven by some sort of macro cliff effect,” Pick said.
Solomon said he generally advises his clients to stay invested rather than try to time the market, adding that such pullbacks are part of a normal investment cycle. Others believe the rally still has a way to go.
Dan Ives, a technology analyst with WedBush Securities who has been bullish on tech stocks, likened Burry’s position to “yelling fire in a crowded theatre”, arguing that both Palantir and Nvidia have shown strong financial results. WedBush believes the AI rally could continue for another two or three years, Ives said.
“Many of these naysayers scare investors with their doomsday predictions and they have been wrong during this entire bull market,” Ives said in an email.
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