Markets plunge worldwide after ‘Big Short’ investor Michael Burry reveals $1.1 billion bet against AI stocks.
Nasdaq 100 futures were pointing downward, premarket, after the index lost 2% yesterday in a massive, global selloff of tech stocks. The selling continued this morning in Asia and Europe. The STOXX Europe 600 went down 0.46% in early trading before recovering. Japan’s Nikkei 225 was down 2.5%. And South Korea’s KOSPI was down 2.85%. Bitcoin dipped below $100K but then rallied a little to $101K.
Yesterday, the Nasdaq Composite was down 2.04%, Palantir lost nearly 8%, Reddit lost 8.4%, Nvidia was down 4%, and SoftBank lost 10% at one point.
The markets are highly vulnerable to a selloff in tech stocks. In October, tech stocks tracked by Bank of America contributed more than 90% of the S&P 500’s total return for the month, according to analysts Savita Subramanian et al. The Magnificent Seven stocks alone contributed 80%.
Those are precisely the stocks that were pummeled yesterday.
Asian markets are also driven largely by a narrow tranche of companies.
“In Hong Kong, it’s six tech stocks that are responsible for 50% of the Hang Seng’s return this year. In Korea, it’s two stocks that are responsible for 40% of the index’s return. In Taiwan, one stock is responsible for more than half of the return, so it is a very narrow rally that is comparable to how much the Magnificent Seven is driving the S&P in the U.S.
Multiple Wall Street analysts are now asking whether equities are heading for the 10% to 20% correction predicted by the CEOs of Goldman Sachs and Morgan Stanley yesterday.
The drama was heightened when Scion Asset Management, Michael Burry’s hedge fund, disclosed to the SEC that it had a short bet worth $1.1 billion against Nvidia and Palantir. Burry, of course, is the investor who placed “the big short” against subprime mortgages prior to the Global Financial Crisis of 2007. The context is that although Palantir is growing like wildfire—its market cap is $450 billion—its annual revenues are expected to be only $4.4 billion.
Palantir CEO Alex Karp was, unsurprisingly, enraged by the move. His company just delivered a Q3 revenue gain of $1.2 billion, up 63%, beating expectations. After yesterday’s losses in the markets, Palantir was down another 3% in overnight trading.
Source: Financeyahoo