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Burry’s Big Short 2.0: NVIDIA, China, and the Beauty Bet

Michael Burry–the man who successfully shorted the U.S. housing market in 2008 and made a fortune while Wall Street burned–just made a pair of other bold calls. As of his most recent Q1 2025 13F filing, nearly 48% of his portfolio is allocated to a single bearish bet: put options on NVIDIA (NVDA).

So…why is Burry going for the throat of the AI boom’s biggest darling?

Let’s break this down–simply, sharply, but with some much-needed context.

NVIDIA: The Face of the AI Mania

Let’s be real–NVDA isn’t just a chip stock anymore. It is the poster child of the generative AI frenzy. The company’s data center segment exploded as hyperscalers, startups, and sovereign funds rushed to hoard GPUs like digital gold. Over the last five years, NVDA shares have gone full parabolic–up well over 1,000% since mid-2020– pushing its market cap well past $3 trillion.

This isn’t just growth–it’s unabated euphoria.

Burry’s entire career is built around one thing: identifying when price and reality completely decouple.

The Core of Burry’s Short: When Hype Overruns Fundamentals

Burry doesn’t short “bad” companies. He shorts unsustainable narratives. And that’s exactly how he likely sees NVDA right now:

• Valuation disconnect: Trading at a P/E > 44 and price-sales north of 30x, NVDA is seemingly priced for perfection, perpetuity, and zero margin for error. Even small earnings misses or decelerating guidance could compress multiples, and its stock price.
• Reflexive buying: Passive funds, momentum algos, retail FOMO–NVDA is so universally loved right now that it’s almost become un-shortable. That’s exactly when Burry historically likes to step in, and the rationale sounds sensible.
• Historical precedent: This moment echoes the dot-com bubble, when Cisco, Sun Microsystems, and Intel were seen as “can’t miss”–until reality severely re-rated them. Cisco, for instance, traded at ~40x revenue at its peak in 2000… and still hasn’t reclaimed that high 25 years later.

Competitive Risk & Demand Saturation

Behind the scenes, structural risks are also brewing–this isn’t just a high-flyer, solely overvalued narrative:

• Rising competition: AMD’s MI300X is catching up. Google, Amazon, and Meta are building in-house AI chips to cut dependence on NVDA. As capital efficiency becomes more important than raw compute power, NVDA’s dominance could erode.
• Demand may be front-loaded: NVDA’s 2024–2025 earnings boom was fueled by hyperscalers aggressively pulling forward demand. The risk now? Normalization. Once capex plateaus and enterprise adoption lags expectations, the “growth” may flatten.
• China exposure + policy risk: U.S. export controls have already cut off some of NVDA’s fastest-growing overseas markets. More geopolitical tension or bans could further dent long-term demand.

Burry’s Not Afraid to Be Early

Let’s be clear: Burry’s known for being early–and taking pain while waiting. In 2006, he was bleeding premiums while betting on a housing collapse that hadn’t yet begun. But when it broke, it broke fast–and big.

Same setup here:

• Massive asymmetric payoff: If NVDA keeps climbing, he loses his premium, or what he initially invested. If it cracks? He potentially 10xs the trade.
• Half the market is crowded long. If the narrative changes–even a little–the unwind could be violent. Forced liquidations from passive vehicles and crowded hedge fund longs could accelerate the drop.

Why Burry Is Also Short Major Chinese Equities

It’s not just NVDA. As of Q1 2025, Burry is also significantly short several of China’s most prominent U.S.-listed companies, including:

• Alibaba (BABA)–13.27% of portfolio
• Pinduoduo (PDD)–11.88%
• JD.com (JD)–8.26%
• Trip.com (TCOM)–6.38%
• Baidu (BIDU)–4.62%

Collectively, that’s over 44% of his portfolio in bearish bets against major Chinese tech and consumer names–which is especially fascinating since not too long ago he was bullish on Chinese equities–circa 2023-2024. Why bearish now?

• Structural macro weakness: China’s economy continues to struggle under the weight of property sector fallout (Evergrande), high youth unemployment, and deflationary pressure. Consumer demand is weak, and stimulus measures have yielded underwhelming results.
• Geopolitical and regulatory overhang: U.S.-China tensions remain elevated. Executive orders, export bans, and rising scrutiny of ADRs all cast uncertainty over future earnings and capital access for these companies.
• Capital flight and sentiment risk: Foreign investor sentiment toward Chinese equities has soured significantly. Hedge funds and institutions have been reducing exposure, while domestic capital controls restrict major inflows. This creates long-term multiple compression risk.
• Accounting transparency and delisting risk: Despite a temporary audit inspection agreement between the PCAOB and China, the risk of future compliance failure or forced delisting lingers in the background–adding further uncertainty.

In short, Burry sees Chinese ADRs as a structurally impaired trade. They are no longer “growth stories” with clear upside. Instead, they’re capital-trapped, geopolitically exposed, and fundamentally challenged firms that remain heavily owned despite deteriorating fundamentals.

Much like NVDA, Burry is betting that sentiment will catch up with reality.

The Estee Surprise: Burry’s Lone Long Bet

While most of Burry’s portfolio is made up of aggressive short bets, there’s one surprising exception: Estee Lauder (EL). As of Q1 2025, this is his only disclosed long equity position.

Why Estee?

• Sentiment has collapsed: EL shares are down over 50% from their 2021 highs due to a mix of overstock issues, China demand weakness, and luxury market concerns. Burry may view this as a classic overreaction–he also enjoys digging into turnaround situations, and Estee Lauder is exactly that.
• Recovery setup: As supply chains normalize and global travel continues to rebound, Burry could see margin recovery and demand stabilization ahead–particularly in travel retail and skincare, and I could even see the case that when in the (likely) near-term, as the federal funds rate begins gradually declining upon the Fed killing off inflation (a lot of factors at play here, but my forecast and many other reputable forecasts pointing at this occurring late 2025 early 2026)–this would likely bode well for EL shares since it would free up some consumer spend and aid Estee Lauder in refinancing some of its debt at cheaper rates, but with other broader signs of material economic weakness in the United States at play, I’d still remain cautious–but this is also in line with his recent positioning with EL, as he reduced his stake in the firm from about 9%→currently about 6%, protecting against the possibility of a recession or pressures thereof prior to the prospective, gradual Fed rate cuts.
• Durable brand power: Estee Lauder owns an enviable portfolio of prestige beauty brands with pricing power, global reach, and a history of bounce-back performance post-downturns. It’s a rare defensive luxury play that has fallen out of favor.

In short, Burry sees what others don’t: a high-quality business beaten down by short-term issues and associated noise paired with palpable bearish sentiment, not long-term deterioration–he also likely sees a macroeconomic-oriented benefit from prospective federal funds rate cuts occurring sometime around late 2025, early 2026.

Bottom Line

Michael Burry isn’t calling NVDA a bad company. What he’s saying is this:

“This is a great company, but it’s priced like it’s the last great company left on Earth.”

It’s the perfect setup for him: frenzied bullishness, unsustainable expectations, no margin for error–and an entire market that’s betting the same way. In Burry’s world, that’s exactly when you strike.

He might be wrong (hence the protective nature of using put options). The AI boom might have more legs. But if he’s right?

He just shorted the bubble before the pin was visible.

Additionally, Nvidia is hardly recession-resistant, so if many plausible fears are confirmed and the economy continues slowing, a large technology company such as this one is going to likely get hit pretty hard.

DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.

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