Key Points
Michael Burry correctly predicted the housing collapse that led to the Great Recession.
More recently, Burry has taken a bearish stance against artificial intelligence (AI) stocks.
Burry shorted Palantir stock earlier this year, and has reportedly done so again.
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Michael Burry rose to prominence as one of the hedge fund managers who foresaw the 2007-2009 housing market collapse, a prediction later detailed in the book and feature film The Big Short. That one correct call effectively cemented his reputation as a skilled short-seller, or an investor who profits when stock prices decline.
In recent years, Burry has been vocal in his skepticism about the artificial intelligence (AI) boom, arguing that many AI-related stocks trade at valuations disconnected from reality. Now, Burry has disclosed a fresh short position in Palantir Technologies (NASDAQ: PLTR), publicly asserting that the shares are intrinsically worth less than $1.
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This isn't Burry's first rodeo with Palantir
This is not Burry's initial bet against Palantir. Earlier this year, he established a modest short position, which fueled a fleeting and sharp sell-off in Palantir stock. Predictably, Burry swiftly covered part of his position, pocketing a profit. Palantir stock eventually recovered, propelled by accelerating demand for the company's Artificial Intelligence Platform (AIP).
Undeterred, Burry appears to be doubling down on his bearish stance. According to his Substack newsletter, Cassandra Unchained, he has purchased out-of-the-money put options expiring in March 2027. The options contracts reportedly have a strike price in the low- to mid-$100 range (the stock recently traded for about $170).
Palantir's earnings defy the bear case
Palantir's second-quarter financial results stand in sharp contrast to any argument that the business is plateauing. Total revenue reached $1.9 billion, a 93% increase year over year. U.S. commercial revenue -- the segment that is most closely tied to enterprise adoption of the company's AI software -- surged 149% year over year to $764 million and rose 28% from the prior quarter. Overall U.S. revenue increased by 115% to $1.6 billion.
Profitability matched Palantir's top-line momentum. The company generated $1.1 billion in net income, an amount that exceeded its entire revenue in the comparable quarter a year earlier. Even more encouraging is that management responded by raising its full-year revenue projection to $8.2 billion, implying 82% growth, and lifted the U.S. commercial outlook to more than $3.4 billion, or at least 134% growth.
Deal activity reinforces the company's rapid acceleration, with record commercial bookings and remaining performance obligations (RPO) that point to sustained expansion. For a company growing at this rate, a claim that the stock is nearly worthless is difficult to reconcile with the reported numbers.
Don't forget about Palantir's intangible strengths
Palantir has spent more than two decades building a portfolio of patents and embedding itself within the U.S. government and its allies. This intellectual property (IP) and long-standing relationships carry intangible value far above Burry's $1 figure. As analyzed above, there is nothing in Palantir's operational trajectory or balance sheet that suggests the company is approaching zero.
In my eyes, Burry is seeking to leverage the outsize attention his name still commands -- nearly two decades after correctly prophesying a single market event. Let's not forget, Burry hasn't predicted anything nearly on the same level as the housing bubble since he became famous.
By publicizing an extreme valuation target on one of the most popular AI stocks, he will almost certainly unsettle some shareholders. This will inevitably prompt a level of emotional panic-selling and create downward pressure that would allow his short position to pay off. Meanwhile, he also draws new attention to his Substack newsletter.
Smart investors understand that Palantir's fundamentals tell a different story. The business is growing by triple-digit percentages in the commercial market, generating substantial cash flow, and raising its projections well beyond Wall Street forecasts.
To me, Burry revealing a new short position against Palantir is little more than theater -- touting a high-profile bet and inviting the market to react. I think the best thing to do here is stomach any volatility that may come in the near term, and continue to monitor Palantir's progress as the AI infrastructure era pushes on in full force.
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Adam Spatacco has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
