Alex Karp vs. Michael Burry: Is Palantir's CEO Right?

Generated Title: Palantir's Karp vs. Burry: A Billion-Dollar Face-Off or Just Noise?

Alex Karp, Palantir's CEO, didn't mince words. He called Michael Burry "bats--t crazy" for shorting his company and Nvidia. Karp’s accusation, aired on CNBC, throws fuel on an already raging fire around AI stocks and their valuations. Burry's Scion Asset Management disclosed a combined $1.1 billion short position against the two AI darlings, a massive bet that raises a critical question: Is Burry a visionary, or is Karp right?

The core of the dispute revolves around valuation. Palantir, despite posting better-than-expected results, saw its shares tumble 9% the same day Karp made his remarks. Nvidia also slipped, down over 2%. This suggests an underlying nervousness in the market, a fear that these stocks, despite their impressive growth, are priced for perfection—or beyond. FactSet data indicates Palantir was trading at over 300 times projected 2025 earnings. Let that sink in. Three. Hundred. Times. That's not just expensive; it's stratospheric.

The AI Hype Machine vs. Reality

Karp accuses Burry of market manipulation, suggesting the short position is an attempt to drive down the price and cover his own position. It’s a serious accusation, but let's unpack it. Is it possible? Sure. Is it probable? That's where the data gets interesting. Burry's firm also disclosed bullish bets on Pfizer and Halliburton, totaling $214 million. However, the Palantir and Nvidia shorts represent roughly 80% of Scion's disclosed portfolio. This isn't a casual hedge; this is a conviction trade. (Meaning, Burry is putting serious skin in the game.)

The narrative Karp is pushing is that Palantir is a "great business" being unfairly targeted. But let's be real: Palantir is a controversial company. Its government contracts, often shrouded in secrecy, raise ethical questions for some. While Karp claims the company delivered "the best results anyone's ever seen," a more nuanced view is needed. Palantir has grown, about 30%—to be more exact, 28.6%—but its profitability remains a subject of debate. The company has only recently achieved consistent profitability, and a significant portion of its revenue still comes from government contracts, which can be lumpy and unpredictable. I've looked at hundreds of these filings, and this reliance on government revenue is a recurring theme with Palantir.

Decoding Burry's Strategy

Burry's public statements offer a glimpse into his thinking. His cryptic message on X, "Sometimes, we see bubbles. Sometimes, there is something to do about it. Sometimes, the only winning move is not to play," suggests he sees parallels between the current AI frenzy and previous market bubbles. He made his name, of course, betting against the housing market before the 2008 crash, a move immortalized in "The Big Short." He has a proven track record of identifying and profiting from market excesses.

The question isn't whether AI is transformative – it is. The question is whether the current valuations of AI-related companies are justified. Are investors pricing in years of future growth today? Burry's bet suggests he thinks the answer is yes, and that a correction is inevitable. If you compare it to the dot-com bubble, the analogy is eerily similar. Companies with revolutionary ideas but little to no profit were being valued at insane multiples.

The lack of a direct response from Burry is telling. He declined to comment, letting his positions speak for themselves. Is he trying to manipulate the market? Maybe. Or, maybe he’s just playing chess while Karp is playing checkers.

The Market Will Decide

Karp's outburst, while entertaining, is ultimately irrelevant. The market will decide whether Burry's bet pays off. If Palantir and Nvidia continue to deliver exceptional growth and justify their valuations, Burry will be proven wrong. If, on the other hand, growth slows, competition intensifies, or the AI hype fades, Burry will be vindicated. The market doesn't care about Karp's feelings or Burry's reputation. It cares about numbers.

So, Is It Genius or Just Plain Reckless?

Only time will tell if Burry's billion-dollar bet is a stroke of genius or a reckless gamble. But one thing's for sure: it's a stark reminder that even in the age of AI, fundamental valuation still matters.