Michael Burry calls Nvidia ‘heck of a trade’ after Huang’s scandal sparks $430 bn selloff. Why is Big Short fame dismissing fears?

Michael Burry is known for his bearish take on artificial intelligence-linked stocks, but the ‘Big Short’ investor dismissed worries around Nvidia following the controversy surrounding CEO Jensen Huang’s extramarital affair, calling the chipmaker a “heck of a trade”.

The popular American investor sees potential for a near-term trading opportunity in Nvidia but doubts the controversy surrounding CEO Jensen Huang will damage Nvidia’s business much. “Still, I believe Nvidia’s competitive advantage will shrink over the next five years,” he said.

While Burry struck a positive note for Nvidia, he is not exactly bullish on the chipmaker. He is not tempted to make a long-term trade on the stock, but he feels the entire market will soon think it is a “heck of a trade.”

Also read | Nvidia Stock Sell-Off Deepens: Spy scandal, price target cuts put AI giant under pressure

All about Nvidia CEO Jensen Huang’s affair controversy

Nvidia CEO Jensen Huang openly admitted that he has been in an intimate relationship with a business executive whom US intelligence reportedly alleged was a Chinese spy, leading to the company launching an investigation into the reports. This has led to a sharp selloff in Nvidia shares, wiping out around $430 billion from its market value in just two sessions.

Huang, in a message to company employees released on Sunday, acknowledged having an affair and apologised to both his family and company staff. “I was unfaithful to my wife. My actions hurt her and our children. There is no excuse for what I did. I am deeply sorry,” the 63-year-old Taiwanese-born executive said.

Also read | Nvidia CEO Jensen Huang faces leadership questions as Republican senator calls for his resignation

Michael Burry takes U-turn on Nvidia?

Notably, Michael Burry had been shorting Nvidia shares until September, when he announced that he is exiting some of the put options. Put options typically reflect a trader’s conviction that the stock price is about to fall. Burry had long held put options on a variety of stocks which remained the face of the AI boom, spooking investors about a possible market crash when the artificial intelligence frenzy fizzles out. The American investor later exited some of the put options, triggering some optimism, but Burry clarified that it was not his intention.

Burry said he sold his December 2026 puts on both Nvidia and Palantir entirely to avoid rapid time-based decay. He added that he did not replace or roll the positions, saying he is “pulling back on exposures across the portfolio.”

Michael Burry’s AI warnings

The American investor who famously correctly predicted the 2008 US housing crisis has been sounding the alarm since the beginning of the year over a prospective big market crash when the AI frenzy fizzles out.

Earlier this year, Burry said he continues to believe that the market is close to a major top, warning of a similar crash to that of 1987 when Dow Jones recorded a historic 23% plunge, which led to the introduction of regulatory circuit breakers. However, the market investor noted that the S&P 500 making new highs likely will bring new money into the market.

He wrote in a Substack post that he sees many indicators, both technical and fundamental, lining up for the same conclusion as the Dotcom crash. “1999 went where no market had gone before, and I would say so can this one…It is already there on several indicators,” he said, arguing that massive venture capital flows, rising AI debt issuance, and extreme market optimism are creating conditions where valuations may detach from economic reality.

Also read | Anthropic retracts details of $69 billion IPO filing sent to bankers. Why analysts are raising worries over valuations

Burry’s popular bet against the housing market was depicted in the 2015 movie titled ‘The Big Short’, which starred Christian Bale, Ryan Gosling, Steve Carell and others.

Disclaimer: This article has been written by Debaroti Adhikary, who is not a SEBI-registered Research Analyst or an Investment Adviser. Debaroti Adhikary and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.