"Dr. Michael Burry, a man of "The Big Short" fame, has a lot of courage to bet against a high-flying company like Nvidia ( NASDAQ:NVDA), which has always found a way to skyrocket higher, even after nail-biting periods of concern. While buying put options is probably less risky than shorting the stock, given shorts carry the potential for uncapped losses if things go wrong and shares continue to blast off in short order, leaving little time to cover one's position,"
"The concentration risks with the S&P 500 (and especially the Nasdaq 100) have been known for quite some time amid the Magnificent Seven's impressive multi-year ascent. However, if Burry is right and profitable with his latest put options on Nvidia, the ripples across the broad stock market are sure to be felt by many, even those who aren't overweight the AI chip giant."
Dr. Michael Burry purchased put options betting against Nvidia, reflecting bearish convictions about the AI chip leader. Buying puts reduces risk compared with naked shorting due to uncapped loss potential on shorts. Precise timing and a correct thesis are crucial for profitable bearish trades. Nvidia's market capitalization exceeds $4.7 trillion, creating significant index concentration exposure for S&P 500 and Nasdaq 100 investors. Burry has maintained skepticism toward semiconductors and AI plays and previously bet against the iShares Semiconductor ETF (NYSEARCA:SOXX) in 2023. Success with these puts would likely create market-wide ripples. Prior bearish bets were sometimes mistimed, leading to missed gains.
Read at 24/7 Wall St.
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