Michael Burry's $1.1B Put Options on Nvidia & Palantir: AI Valuation Overview

Michael Burry, who correctly predicted the 2008 financial crisis, may have made markets take notice of his investment decisions. SEC filings from him show $1.1 billion worth of put options against Nvidia and Palantir artificial intelligence leaders, which has caused new discussions about technology market values and investor attitudes. Understanding institutional trading mechanisms and their potential impact on market structure is vital for retail investors who want to protect themselves during times of market volatility.

TL;DR

• Michael Burry's Scion Asset Management disclosed $1.1 billion in put options against AI leaders Nvidia and Palantir in Q3 2025. 

• The disclosure triggered market volatility, with the Nasdaq declining 3%, while valuation debates intensified around Palantir's 280 forward earnings multiple. 

• Insider selling patterns, historical valuation metrics, and contrarian institutional positioning suggest heightened market uncertainty around AI stock valuations.

Burry's $1.1B Options Positions: Nvidia & Palantir Breakdown

According to SEC filings, Scion Asset Management purchased approximately $187.6 million in put options on Nvidia and $912 million in put options on Palantir during Q3 2025. These positions represent 1 million Nvidia put options and 5 million Palantir put options, numbers that caught market attention when disclosed.

Put options, for those unfamiliar, are financial instruments that increase in value when underlying stocks decline. These instruments function as insurance policies against price drops, but sophisticated investors employ them for multiple strategic objectives which extend past basic market direction speculation. The large number of positions held by Burry indicates his strong beliefs, but the exact investment approach needs analysis because options positions do not always indicate simple bearish market positions.

The timing of the disclosure plays a significant role in this situation. The SEC requires institutional investors to disclose their holdings within 45 days after the end of each quarter, which leads to market responses based on outdated information. The time gap between market transactions and public disclosure creates intricate market conditions, as investors can execute position closures, hedging, and rolling before disclosure occurs. (Source: Yahoo Finance)

Nasdaq Drops 3%: Market Reaction to Burry's AI Stock Puts

The market's response was swift and notable. The Nasdaq Composite experienced its worst week since April, following the disclosure, and declined approximately 3%. This reaction demonstrates how institutional positioning disclosures can influence retail sentiment, creating self-fulfilling prophecies of sorts.

Palantir's price action proved particularly intriguing. The stock price dropped 8% on 4 November after the company delivered better-than-expected Q3 earnings results. The market reaction shows how investor sentiment and market positioning can cause stock prices to deviate from fundamental performance during short-term periods. The stock price of Palantir experienced a 173% increase throughout the year before this market correction, which could have led to increased profit-taking activities.

Nvidia & Palantir Insider Sales: $9.3B in Context

SEC Form 4 filings show an additional interesting detail beyond Burry's options activity. The combined value of Nvidia and Palantir insider stock sales reached $9.3 billion during the last two years, according to company insiders. The large-scale of insider stock sales creates market concern, although executives typically sell their shares for tax optimisation and portfolio expansion, as well as financial independence purposes.

The evaluation process needs to examine these patterns in detail. Planned sales under 10b5-1 programmes differ significantly from discretionary selling. The first type runs automatically according to a preset schedule, whereas the second type displays what insiders believe about market value. Investors need to review the entire filing information, rather than focusing solely on the numbers at the top, to determine the true value of insider trading activity.

Valuation Metrics in Historical Context

The core of this story revolves around the valuation dispute. Last quarter, Palantir reported more than $1 billion in quarterly revenue for the first time, and its forward price-to-earnings ratio has surged past 280 times, at the same time, Nvidia trades at approximately 20 times forward earnings. The different multiples in the table present various perspectives about market expectations and risk premiums.

Market leaders with price-to-sales ratios above 30 have proven unable to sustain such ratios, according to historical market data. The current P/E ratio of Palantir stands higher than that of Nvidia by more than ten times, which suggests either strong growth expectations or a potential return to normal valuation.

The Bull Case for Nvidia & Palantir Despite Burry's Bet

Not everyone agrees with the bearish positioning. Palantir CEO Alex Karp declared to CNBC that investors who doubt his company are "crazy" because he believes Palantir stands as "the most important software company in America". The CEO's strong statements about his company align with the actual business growth resulting from the adoption of AI in government and enterprise markets.

Analysts who support high valuations for Nvidia point to its dominant position in the GPU market, with a 92% market share. The company maintains control of its AI infrastructure, which suggests it will protect its high valuation multiples for an extended period into the future. The question becomes whether current prices already reflect this dominance or if markets are pricing in unrealistic growth trajectories.

Burry achieved great success in his career, but he also experienced some major investment failures. CNN Business documented that Burry placed a "Sell" indicator on his portfolio during January 2023 before he admitted his error by stating, "I was wrong to say sell," in March 2023. The famous investor's display of humility proves to traders that advanced market analysis techniques are not effective in predicting market direction.

Risk Management Considerations for Retail Traders

The knowledge of large institutional option positions enables retail investors better to handle market volatility through improved market structure management. When major players buy put options, market makers who sell these options may hedge by shorting the underlying stocks. The price drop leads to increased short selling, which produces adverse gamma effects that may intensify market declines.

Time decay stands as an essential element in this process. The value of options decreases when time approaches expiration, which causes Burry's positions to lose value unless the stock prices experience substantial declines. 

The following risk management tools can be helpful for investors who execute these market movements. Stop-loss orders serve as a risk management tool to limit losses, but they do not protect against price gaps or market volatility, which can lead to execution slippage. Moreover, market unpredictability can trigger the execution of take-profit orders, which may function as protective measures for traders to secure their profits. 

AI Stock Sentiment Indicators: Put/Call Ratios & Fund Flows

The current market structure contains various competing factors. Some investors choose to hedge their investments through put options and reduce market exposure, while others maintain their support for AI technology. The two assets exhibit distinct market patterns, resulting in price movements that active investors would find valuable to monitor.

Sentiment indicators generate various results when they perform their analysis. The data from options flow shows that tech stocks have seen rising put/call ratios, which suggest some investors are adopting defensive strategies. The positive fund flow into technology ETFs indicates that institutional investors continue to invest in technology despite their valuation concerns. Major changes in the market often emerge from conflicting market trends, but the exact direction of these changes remains difficult to predict.

Conclusion

Michael Burry's $1.1 billion options play against Nvidia and Palantir crystallises the broader AI valuation debate currently dividing markets. The Nasdaq stock price declined by 3%, while the Palantir stock price dropped 8% after the company exceeded earnings expectations. This was due to institutional investors' positions creating a sentiment cascade that resulted in actual price movements, affecting all market participants. 

The market remains uncertain about Palantir's 280 forward earnings multiple compared to Nvidia's 20 multiple, while insiders have sold $9.3 billion worth of stock.

The main point for retail investors does not depend on knowing if Burry will be correct or incorrect because he himself acknowledged being wrong about selling just a few months prior. The solution requires understanding how large options positions generate technical market pressures through gamma hedging and how sentiment dominates fundamentals in short-term periods, resulting in market volatility.

* Past performance is not indicative of future results. The above are only projections and should not be taken as investment advice.