Michael Burry Buys NVDA Calls As A ‘Hedge,’ Adds To ORCL, PLTR, NBIS Shorts — Why He Thinks ‘Nvidia Will Not Distribute Enough To Shareholders’

• Michael Burry believes Nvidia is worth less than its current market value.
• He added to shorts in Oracle, Palantir, Nebius and Caterpillar.
• Burry’s total short stock position now exceeds 21% of his portfolio, excluding puts.

Michael Burry bought December Nvidia (NVDA) calls ahead of the company’s earnings, while adding to his short positions in Nvidia, Oracle (ORCL), Palantir (PLTR), Nebius (NBIS) and Caterpillar (CAT).

The “Big Short” investor said his total short stock position is now over 21% of his portfolio, excluding puts, and that he is also adding to positions in Birkenstock (BIRK) and Freddie Mac (FMCC).

Burry Buys Nvidia Calls As ‘Hedge’

Burry said in a post on Substack he bought December Nvidia calls with strikes set in the mid-to-high $200s and paid single digits, describing the position as a “hedge.” He said the premium on the calls is significant but is “entirely offset” by his short position.

“I am not playing for gains here,” Burry said, adding that he would not have made the trade if he did not have such a large short and put position. He said that position represents 3.5%-4% of his portfolio.

Burry said he has historically used the strategy with his short positions around earnings, but acknowledged that he does not have a great record with it.

Why Burry Says Nvidia Is Overvalued

Burry said Nvidia stock has fallen more than it has risen after earnings of late. He said the company’s current stock price is “not congruent with the market’s narrative.”

“On the face of it, the stock is wildly undervalued,” Burry said, pointing to a low P/E for a big grower that currently commands monopoly rents.

However, Burry said NVDA stock is “treading water compared to recent years’ performance.” He added that his theoretical value for Nvidia is “much lower than today’s market value.”

Nvidia’s Monopoly Power Running Out?

Burry said his analysis points to a short run for Nvidia’s monopoly power and therefore falling earnings margins.

He also said he believes Nvidia “will not distribute enough to shareholders,” adding that its focus may increasingly shift toward capital expenditures and investments to diversify and continue growing sales.

Burry said Nvidia’s investment “into and through the top of the bubble” may result in “shocking reductions in earnings” not terribly far into the future.

Despite his concerns about Nvidia, Burry said the potential reaction to earnings is “but a coin flip.” “The market does not believe,” he said. “Today, perhaps belief will be restored, however temporary it may be.”

Short Bets Now Top 21% Of Burry’s Portfolio

Burry has also shorted “a little more” Oracle, Palantir, Nvidia, Nebius, and Caterpillar this week. The total short stock position is over 21% of his portfolio, not including puts.

He also added to his position in Birkenstock in the mid-$30s, calling it a full position, and added to his position in Freddie Mac in the mid-$5s. He said he has a large position in Fannie Mae.

NVDA, ORCL, PLTR, NBIS: Stocktwits Retail Sentiment

On Stocktwits, retail sentiment was ‘bullish’ for NVDA, ‘bearish’ for PLTR and NBIS, and ‘extremely bearish’ for ORCL at the time of writing.

Year-to-date, NVDA stock is up more than 12%, and NBIS shares have surged over 150%. Meanwhile, PLTR stock has slipped nearly 5%, and ORCL shares have fallen more than 23%. 

Also See: META’s $17B Settlement Clears Legal Overhang — Analysts See A Stock Opportunity, But With A Catch 

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