Michael Burry's Bearish Shift: A Contrarian Signal for AI and Chinese Tech?

The contrarian investor made famous by his bet against the housing bubble in The Big Short has once again positioned himself at the edge of the market’s consensus. Michael Burry’s recent portfolio moves—loading up on put options against NVIDIA (NVDA) and Chinese tech giants like Alibaba (BABA), Baidu (BIDU), and JD.com (JD), while doubling down on Estée Lauder (EL)—signal a seismic shift in his outlook. This isn’t merely a tactical adjustment; it’s a bold contrarian thesis that questions the sustainability of growth-driven sectors and highlights underappreciated risks in AI hype and China’s regulatory landscape. For investors, the question is clear: Are Burry’s bets a canary in the coal mine for tech overvaluation, or are they a misstep in an overheating market?

The Bearish Bet on Tech: AI Hype or Structural Overvaluation?

Burry’s most striking move is his aggressive bearish stance on NVIDIA, where he has bet $98 million via 900,000 put contracts. This is a direct challenge to the AI-driven rally that has propelled NVDA’s stock to dizzying heights. The question is whether Burry sees a bubble in AI’s valuation or structural flaws in its adoption.

The data reveals a stock trading at a forward P/E of 63—a multiple more than double its five-year average—while revenue growth from AI has yet to offset declining gaming chip sales. Burry’s skepticism aligns with concerns that AI’s transformative potential is being priced in before it materializes. Meanwhile, the broader tech sector’s reliance on speculative growth metrics (e.g., revenue multiples) makes it vulnerable to a reassessment of fundamentals.

Chinese Tech: Regulatory Overhang and Geopolitical Crosswinds

Burry’s puts on Chinese tech stocks—totaling over $75 million—reflect a dual concern: regulatory risks and U.S.-China tensions. His exit from long positions in Alibaba, Baidu, and JD.com, paired with bearish bets, suggests he believes these companies are overvalued in the face of rising geopolitical friction.

While companies like Pinduoduo (PDD) boast strong fundamentals (e.g., 59% revenue growth, $44 billion in cash), Burry’s puts may anticipate that macro headwinds—such as Washington’s export controls on semiconductors or Beijing’s crackdown on data privacy—will outweigh individual strengths. The recent “Liberation Day” tariffs on Chinese goods, announced after Burry’s Q1 filings, underscore the escalating risks.

The Contrarian Long in Estée Lauder: A Value Play or a Cyclical Gamble?

Burry’s sole remaining long position—Estée Lauder, now at 200,000 shares—is a stark contrast to his tech bets. The luxury beauty giant’s stock has plummeted 80% from its $355 peak, even as its net income halved to $400 million in 2024. This is a classic contrarian value play: a globally recognized brand with a 90-year history, operating in a sector (luxury goods) that tends to outperform during recoveries.

Burry’s bet hinges on two assumptions: (1) demand for luxury beauty will rebound as Asian economies stabilize, and (2) Estée Lauder can regain market share against local competitors like China’s Foreo or South Korea’s Innisfree. The risk, however, is that the global consumer discretionary sector remains sluggish, or that the company’s operational challenges (e.g., supply chain bottlenecks) persist.

The Tactical Use of Put Options: A Hedge or a Speculation?

Burry’s use of put options—instead of shorting—exemplifies his risk-aware approach. Puts allow him to profit if the underlying stocks decline while capping his downside (to the premium paid). This contrasts with traditional shorting, which has unlimited risk. His strategy also avoids the liquidity constraints of shorting thinly traded Chinese ADRs.

Yet the concentrated nature of his portfolio—$155 million in puts and EL—underscores the high-conviction nature of his bets. This isn’t hedging; it’s a concentrated wager that tech valuations are due for a reckoning and that value stocks like EL are priced for disaster.

What Investors Should Do Now

Burry’s moves present a compelling roadmap for investors seeking to balance growth exposure with safety:

1. Reduce exposure to overvalued tech stocks, particularly those reliant on AI hype (e.g., NVDA, AMD) or Chinese equities facing regulatory risks.
2. Consider defensive plays in consumer staples, starting with Estée Lauder. Its dividend yield of 1.8% and fortress balance sheet ($6 billion in cash) add further appeal.
3. Use put options or inverse ETFs (e.g., ProShares Short Technology ETF) to hedge against sector declines, without the complexity of shorting.

Burry’s pivot isn’t about timing the market—it’s about positioning for a world where growth is harder to sustain and value is finally rewarded.

In the end, the question isn’t whether Burry is right about AI or China’s tech sector. It’s whether investors are prepared to act on a signal from one of the market’s most prescient contrarians. The clock is ticking.

Disclosure: This article is for informational purposes only and not a recommendation to buy or sell securities.