Michael Burry’s Short on Palantir: It Will Depend on How Well AI Can Be Monetised

Michael Burry has a habit of showing up when markets feel most certain. In 2006–08, he became famous for betting against sub-prime mortgages when most of Wall Street was still bullish. Today, he is making another contrarian call, this time on AI-led stocks, with Palantir at the centre of attention.

The headline sounds dramatic: Burry is “short” Palantir.
But the real question is simpler.

If this trade is to work, it will not be decided by narratives about AI.
It will be decided by whether AI spend converts into measurable earnings and whether the market is willing to keep paying extremely high multiples while waiting.

Who is Michael Burry and why markets watch him

Burry was immortalised by The Big Short story for one reason: he was early, he was unpopular, and he was right.

He identified that a large part of the sub-prime mortgage market had turned toxic, and he built a position that would profit if mortgages failed. When the crisis hit, his trade paid off.

That history matters because it shapes how people interpret his current bets. When he takes a large bearish position, it attracts attention, even if:

• the position is expressed through options
• the headline “size” can be misunderstood
• the timing is not immediately obvious

In this case, the focus is on his bearish positioning in AI-related names, especially Palantir.

What exactly is Burry’s Palantir "short"

This is the most important part to get right.

Burry’s position is described as a large “short”, but it is implemented through put options.

The market often confuses notional value with money at risk.

Notional value vs actual risk

A put option gives the buyer the right to sell at a fixed price (strike). The buyer’s maximum loss is typically the premium paid.

So even if headlines shout “$912 million bet”, the risk borne by the option buyer is closer to the premium. Multiple reports around the position highlighted that the premium outlay was around $9.2–$9.3 million, while the $912 million figure is the notional exposure shown in filings.

This is why the trade is audacious in narrative terms, but not “all-in” in capital-at-risk terms.

The strike price gap tells you the kind of move he is betting on

A $50 strike when the stock is around $140 means one thing.

Burry is positioned for a large downside move, not a mild pullback.

Your brief frames this as a view that Palantir could correct ~70% from current levels, which would bring it closer to the strike zone where the puts would become meaningfully profitable.

That also explains why the trade horizon matters. If the options run into 2027, Burry is giving time for a big fundamental re-rating to play out, not just a short-term “bad quarter” reaction.

Valuation is the fuel and the risk in this story

Your provided valuation markers:

• Palantir trading at 220X earnings
• At the peak, it traded at 388X earnings
• In early 2023, Palantir had corrected ~80% in a short span

These numbers are directionally pointing to the same idea: the stock has historically seen extreme valuation swings, and when the market mood changes, the drawdowns can be sharp.

One important nuance for accuracy: different sources quote different Palantir multiples depending on which earnings metric is used (trailing vs forward, GAAP vs adjusted). For example, some recent market commentary has cited valuation closer to ~100x forward earnings, which is still expensive but not the same as 220x.

So the core point remains intact even with metric differences:

• Palantir’s valuation is high
• it leaves little room for disappointment
• multiple compression is a real risk if growth or monetisation looks weaker than expected

What this trade is really about: can AI spend be monetised

This is where the Palantir story becomes a broader AI story.

Across big tech and enterprise software, spending on AI has been massive. Investors have become more demanding on one question:

Show me the earnings impact, not just the product story.

In parts of the market, there are already signs that AI investment is not always treated as an immediate “price booster”. In some cases, it can even create pressure if costs rise faster than monetisation.

So Burry’s trade, in practical terms, is not only about whether Palantir is a good company. It is about whether:

• AI productivity gains become visible in client budgets
• AI contracts scale profitably
• and the market stays willing to pay premium multiples while waiting

If the market decides that “AI promise” needs to be priced more conservatively, high-multiple names tend to re-rate fast.

What could make Burry right

Burry wins big if a combination of these happens:

1. AI monetisation disappoints

If revenue growth does not translate into durable profit expansion, valuation support weakens.

2. Multiple compression accelerates

Even if the company executes reasonably well, high-multiple stocks can fall if the market shifts to a lower valuation regime.

3. Narrative weakens before fundamentals fully catch up

Markets often re-price first, then wait for numbers to confirm.

In short, the trade works if the market stops rewarding “AI potential” with extreme multiples and starts demanding clearer cash outcomes.

What could make Burry wrong

There are also clear scenarios where the trade fails.

1. Palantir monetises AI better than expected

If AI-driven deals scale, renew, and expand margins, the valuation can stay elevated longer than bears expect.

2. Government and defence demand remains strong

Palantir has meaningful government-linked work, which can be stickier than purely discretionary enterprise spending.

3. The bullish sell-side view holds up

Your brief notes that Citi has a 55% upside target on Palantir. Citi commentary around a ~$235 target has been reported as implying roughly ~55% upside in that context.

If bullish targets and improving earnings keep the stock supported, the puts can expire worthless, and Burry’s loss would be limited to the premium.

So what decides the outcome

This trade will likely be decided by AI economics, not AI excitement.

Burry’s structure gives him:

• limited downside (premium paid)
• asymmetric upside if a sharp re-rating happens
• time (multi-year horizon) for the thesis to play out

But for him to make meaningful profits, the market needs to move far enough, fast enough, before expiry.

The core hinge is simple:

• If AI becomes clearly monetisable, expensive AI stocks can stay expensive.
• If AI monetisation looks slower, valuation can compress sharply and that is where this trade pays.

Key Takeaways

• Burry’s Palantir position is via put options, not a traditional short.
• The $912 million figure is notional exposure; the premium at risk is closer to ~$9.2–$9.3 million.
• A $50 strike versus a stock around ~$140 implies he is positioned for a large drawdown, not a mild correction.
• The bigger question is AI monetisation, not AI adoption.
• Valuation discussion depends on the earnings metric used, but the stock is widely seen as trading at very high multiples.
• Citi’s reported stance includes a target implying meaningful upside, showing the market remains split on the outcome.

Disclaimer: This article is for general information and educational purposes only and is not investment advice or a recommendation to buy or sell any security. Investing involves risk, including loss of capital.