From TipRanks, August 26:
Ahead of Nvidia’s NVDA -1.59% ▼ Q2 results, Big Short investor Michael Burry added to his short position despite expecting the AI chipmaker to report strong earnings. According to his Substack, Burry also bought December call options, describing the calls as a hedge rather than a bullish bet. He wrote, “On the face of it, the stock is wildly undervalued. Low PE for a big grower that currently commands monopoly rents.”
Burry Remains Bearish on Nvidia
Burry said his theoretical value for Nvidia is “much lower than today’s market value,” arguing that the company’s current valuation does not fully reflect the potential risks to its AI-driven growth. He believes Nvidia’s competitive advantage, AI dominance, and high margins could prove less durable than investors expect, potentially making the stock’s current valuation too high.
Burry maintained his bearish stance despite expecting Nvidia’s upcoming results to be very strong. He had previously said the company could deliver a “lights out” quarter, while warning that concerns around AI spending and circular financing remain.
Why Is Burry Buying Calls?
Burry purchased December Nvidia call options with strikes in the mid-to-high $200s, paying a single-digit premium. However, he stressed that the calls are intended to protect his bearish position if Nvidia shares surge following earnings.
Burry said he is “not playing for gains here” with the calls and that he would not have made the trade without his much larger short and put exposure. His puts represent roughly 3.5%-4% of his portfolio, while his overall short stock exposure has risen above 21%, excluding puts. Burry has used similar hedging strategies around earnings in the past, although he acknowledged that his track record with this approach has been mixed.
Notably, after markets closed on August 26....
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