MW 'Sometimes the only winning move is not to play,' says Michael Burry in bubble warning

By Jamie Chisholm

Concerns about stock market exuberance build as AI tech spending sees shift to debt

Michael Burry was quoting the famous line from the movie Wargames, presumably about his willingness to participate in the AI-fueled bull market.

It's getting choppy. The heavy weighting afforded the megacap tech stocks meant the reception given to their third-quarter earnings was very likely to determine the stock market's short-term direction.

And so, poorly-received reports from Meta (META) and Microsoft $(MSFT)$ saw the wider market retreat sharply on Thursday, while positivity over Amazon.com (AMZN) and Apple $(AAPL)$ results are pushing index futures back up on Friday.

The volatility speaks to investors' sensitivity to any sign of cracks in the bullish AI narrative that is currently delivering stock market exuberance. And we can consider Michael Burry of hedge fund Scion Asset Management in the cautious camp.

In a new message on X, Burry - who rose to fame after being featured in the Michael Lewis book "The Big Short" and was played by Christian Bale (below) in the movie - delivered a poetic warning: "Sometimes, we see bubbles. Sometimes, there is something to do about it. Sometimes, the only winning move is not to play," the latter a reference to the nuclear-showdown assessment from the movie Wargames.

Because he is mainly known for his bets against esoteric credit assets ahead of the 2007-08 financial crisis, Burry is wrongly labelled as a perennial bear.

However, 13-F filings with the Securities and Exchange Commission show that at the end of last year SAM held only long positions, with his top three bets on China's Alibaba $(BABA)$, Baidu $(BIDU)$ and JD.com $(JD)$.

At the end of the first quarter of 2025 he had tuned more cautious buying put options - a bet share prices will fall - on the three China tech companies. His biggest position was a put trade on Nvidia (NVDA), which did trend lower for the first four months of this year.

Burry's next filing for the end of June shows that negative Nvidia position gone - though we don't know exactly when he closed it - which is just as well, because the chipmaker's stock has more than doubled since its April lows.

Instead, the portfolio was replete with bullish bets, including call options - the right to buy a stock - on Alibaba, Meta, ASML $(ASML)$, UnitedHealth $(UNH)$, Regeneron Pharmaceuticals $(REGN)$ and lululemon athletica (LULU). Scion has held shares of Estee Lauder $(EL)$ all year, the only constant.

Burry's next 13-F for his holdings up to the end of September is due in about two weeks. It's still possible that it contains mainly long positions - after all the end of the third quarter was a month ago. But his latest social media message suggests he is nervous about the stock market's rally, and he's now adopting a much more defensive stance.

One reason why observers like Burry may be getting more anxious is evidence of a shift in the funding of big tech capex.

Traders have been happy to see hundreds of billions of dollars earmarked for AI-related investment, particularly as most of the money was sourced from company cashflow.

But Meta's recent deal to construct its Hyperion data center site in Richland Parish, Louisiana, included a $30 billion financing package comprising mostly of debt held via a special purpose vehicle. The structure means Meta does not hold the debt on its balance sheet, helping to protect its credit rating.

The concern among some investors is that as companies look for ever more funding to deploy, they may use the Meta deal as a template. Spending cash from the kitty is clean, clear and less dangerous if things go wrong. Financial engineering using what could be called quantum debt, which can be two things at once - not debt according to the rating agencies, but Meta-backed debt according to the buyers - is more opaque and potentially more risky.

The Financial Times and Bloomberg report that Meta is also looking at another $25 billion bond sale. Right now there's a prospectus filed at the Securities and Exchange Commission without a specified amount.

The markets

U.S. stock-index futures (ES00) (YM00) (NQ00) are higher as benchmark Treasury yields BX:TMUBMUSD10Y nudge up. The dollar index DXY is little changed, while oil prices (CL.1) fall and gold futures (GC00) are trading around $4,016 an ounce.

   Key asset performance                                                Last       5d      1m      YTD      1y 
   S&P 500                                                              6822.34    1.25%   1.59%   15.99%   19.58% 
   Nasdaq Composite                                                     23,581.14  2.79%   3.23%   22.11%   30.32% 
   10-year Treasury                                                     4.109      8.60    -1.20   -46.70   -28.80 
   Gold                                                                 4014.8     -2.71%  2.63%   52.12%   46.19% 
   Oil                                                                  60.24      -1.95%  -0.76%  -16.18%  -13.11% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

The buzz

Amazon.com (AMZN) and Apple shares (AAPL) are higher after both companies delivered well-received earnings after Thursday's market close.

Netflix shares $(NFLX)$ are rising after announcing a 10-for-1 stock split that may help the streaming company join the Dow Jones Industrial Average.

Energy majors Exxon Mobil (XOM) and Chevron $(CVX)$ highlight Friday's earnings, with Chevron reporting stronger-than-forecast results.

U.S. economic data due Friday include the Chicago Business Barometer for October, due at 9:45 a.m. Eastern.

Cleveland Fed President Hammack and Atlanta Fed President Bostic take part in fireside chat at Dallas Fed conference, starting 12:00 p.m.

Palantir Technologies (PLTR) is suing two former employees for allegedly stealing secrets to help build a rival company.

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The chart

Source: Macrobond

The Federal Reserve just cut interest rates again. How will the dollar react? The chart from Macrobond shows how the dollar index DXY has moved in a year's worth of trading sessions before and after the last five cuts.

"The response of the DXY to the past five cuts highlights a general upward short-term shift in the first 50 -100 days after each cut, followed by a gradual decline in the index into negative territory," says Macrobond. "This pattern suggests that, while the dollar may show brief resilience immediately after a policy move, it typically weakens as markets adjust to a sustained easing cycle and narrowing rate differentials."

Top tickers

Here were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern.

   Ticker  Security name 
   AMZN    Amazon.com 
   NVDA    Nvidia 
   TSLA    Tesla 
   AAPL    Apple 
   META    Meta Platforms 
   BYND    Beyond Meat 
   GME     GameStop 
   TSM     Taiwan Semiconductor Manufacturing 
   AMD     Advanced Micro Devices 
   PLTR    Palantir Technologies 

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October 31, 2025 06:55 ET (10:55 GMT)

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