Opens new shorts on AI: Michael Berry warns of “the beginning of the end”

Tesla, Caterpillar, the chip maker Applied Materials And a basket fund that tracks chip stocks are among the new short positions reported by Berry, one of the protagonists of Michael Lewis’s book on the financial crisis “The Money Machine”.

These positions are part of a months-long bet designed to turn a profit if the enthusiasm around artificial intelligence fades.

These bets come at a sensitive time for the industry, when the United States government intervened in the launch of Anthropic’s Mythos model due to national security concerns, and at the same time the price shock of the use of artificial intelligence led companies such as Microsoft launch cheaper alternatives.

For Berry, plans by two of South Korea’s biggest tech companies to build a new chip center have raised renewed concerns about whether the huge sums of money being invested in artificial intelligence can ever pay off. Samsung and SK Hynix announced earlier this week that they intend to invest more than 500 billion dollars in establishing the center. The following day chip stocks led the gains in the Nasdaq index.

“The immediate driver of today’s gains is the massive spending announced in Korea,” Berry wrote Tuesday on his Substack platform. “Well, for me this is the beginning of the end.”

Berry is one of the most prominent critics of the enthusiasm surrounding artificial intelligence in the stock market. According to him, the investors are ahead of the curve when they raise the price of some of the largest companies in the industry, and ignore the risks involved. Berry, known for his eccentric personality, gained a large online following after predicting the collapse of the US housing market during the financial crisis of 2008 and 2009.

One of Berry’s updated positions uses put options on the Sel fund, which tracks a chip stock index that includes companies such as Micron Technology and-AMD . The short position on the basket fund, traded under the trading symbol SOXX You will make a profit in March if the fund falls by one third of its peak. Berry previously held options that would have yielded a profit only in the event of a sharper decline until January.

“SOXX itself is a pure expression of overpricing in the index, in a way that is rare to see, and has never been so easy to spot,” he said.

Berry also opened in short position Caterpillar which he says has previously yielded him profits “in a long position”. He did not elaborate on the reasons for this position, but the company’s equipment is used to set up data centers and chip manufacturing centers. The company’s stock has risen in recent months.

Berry’s comments, which usually delve into the details of the reasoning behind his short positions, were relatively brief this time. He listed his short position on Elon Musk’s electric car maker, which is working to bring autonomous driving to the masses, with a target price of $416.22. This is not the first time Berry has bet against Tesla .

Berry also increased his short position on Nvidia which has been going on for months.

In November Berry revealed bets according to which Nvidia shares andPalantir are expected to register a sharp decrease until 2027, although for different reasons. He says Nvidia uses circular financing deals to help fund some of its biggest customers, which he believes could lead to a dot-com bubble-style collapse. As for Palantir, he argued that it relies too heavily on government contracts and could be replaced by competitors.

These short positions were heavily criticized at the time. Nvidia denied there was any problem with its funding, while Palantir CEO Alex Karp called Berry “absolutely crazy” on CNBC.

Berry’s bets are still far from the price levels he says they will reach.

Nvidia’s stock, which still holds the title of the company with the highest market value in the world, is trading 5% below its level on the day Berry announced his short position. Palantir’s stock performed weaker, and is 40% lower.

Berry and the companies he says he holds short positions against did not respond to requests for comment.

This article was translated by Globes exclusively from The Wall Street Journal. Link to the original article in English.