Michael Burry Hedged Nvidia Short Position With Call Options Ahead of Surge

Famed investor Michael Burry expanded his bets against Nvidia Corp. throughout 2026 while simultaneously purchasing call options on the artificial intelligence chipmaker ahead of its second-quarter earnings release. While the simultaneous purchase of bullish call options alongside short positions appeared paradoxical on Wall Street, Burry detailed the rationale in a recent Substack post, framing the derivatives trade as a risk mitigation tactic rather than a vote of confidence in the semiconductor giant.

According to details first reported by Benzinga, Burry acquired December Nvidia call options with strike prices in the mid-to-high $200 range to hedge against potential upside surprises. The call options represented between 3.5% and 4% of his fund's portfolio, structured specifically to protect an expansive short position. In the Substack update titled "Nvidia, Friends, and the Rebel Alliance," Burry noted he would not have taken the option position without existing short equity and put positions already in place. Cryptonomist reported that Burry also enlarged short positions against enterprise software and AI infrastructure vendors including Oracle Corp., Palantir Technologies Inc., and Nebius Group, pushing his aggregate short equity portfolio past 21%, while maintaining long positions in non-tech holdings Birkenstock and Freddie Mac.

The hedging strategy immediately preceded one of the technology sector's most anticipated financial disclosures. Nvidia posted adjusted earnings of $2.22 per share on $96.2 billion in revenue for its fiscal second quarter, exceeding consensus Wall Street estimates of $2.09 per share and $92.27 billion, as reported by CNBC. Revenue surged 106% year over year during the quarter. Looking forward, Nvidia Chief Financial Officer Colette Kress outlined projected third-quarter revenue of over $108 billion, plus or minus 2%, while predicting 70% revenue growth for fiscal 2028—nearly double analyst forecasts. Additionally, the company disclosed that supply commitments jumped to $279 billion from $119 billion in the preceding quarter, driven largely by memory component procurement.

Following the report, Nvidia shares snapped a multi-quarter trend of post-earnings pullbacks. Shares jumped approximately 8% on August 27, according to reporting by TheStreet, pushing the market capitalization deeper into historic territory after crossing the $5 trillion threshold earlier in 2026. Nvidia had closed the previous week at $217.56 per share, up 17% year to date. Heading into the earnings release, Wall Street maintained an overwhelmingly bullish posture, with 58 of 61 covering analysts recommending a buy rating and setting a mean price target of $305.41, implying more than 43% potential upside from pre-earnings levels.

Despite Nvidia's quarterly beats, Burry has maintained his critical stance regarding the long-term sustainability of the AI infrastructure boom. As reported by U.Today, Burry acknowledged that while Nvidia appears extraordinarily cheap on paper relative to its price-to-earnings ratio and market power, his internal valuation models put the stock's intrinsic value well below current trading levels. Burry argued that the company's valuation metrics fail to account for structural risks associated with capital allocation and long-term distributions to shareholders.

Burry expressed concern that Nvidia is over-investing heavily near the peak of a spending supercycle, warning that aggressive capital outlays could eventually result in sudden, severe earnings drops once market demand cools. As reported by TheStreet, he cautioned that Nvidia is unlikely to return sufficient cash to equity holders relative to its massive valuation. The thesis builds on arguments Burry raised in May, when Cryptonomist reported he compared Nvidia's vendor financing structures and revenue recognition mechanisms in AI deals to practices seen at Cisco Systems Inc. during the late 1990s dot-com bubble, suggesting that compliant accounting does not eliminate systemic risk across the broader technology ecosystem.

Before the earnings announcement, Burry characterized the short-term market reaction as little more than a "coin flip," asserting that broader institutional sentiment toward AI growth is fundamentally shifting despite periodic earnings-driven rallies. The divergence highlights a widening split in Silicon Valley and high-finance circles between traditional Wall Street price targets and macro-focused short sellers. Moving into the second half of the year, investors will be monitoring whether Nvidia expands share repurchase and dividend programs to satisfy capital allocation critics, or whether capital expenditures across the AI supply chain begin to show signs of deceleration.