What just happened? Michael Burry is winding down his hedge fund, Scion Asset Management, after warning that US equity markets no longer reflect underlying economic value. The investor, whose prescient bet against mortgage-backed securities before the 2008 financial crisis was immortalized in the movie 'The Big Short', told clients that he plans to liquidate the fund and return investor capital by the end of the year, apart from a small reserve for audit and tax obligations.
As 2025 draws to a close, Michael Burry's exit reads less as capitulation than as a confirmation of his conviction: when prices move too far from fundamentals, even the most disciplined investors eventually step aside.
According to people who received his October 27 letter to investors, Burry wrote that his view of fair market value has long diverged from prevailing prices. That gap, he said, has grown too wide to justify maintaining positions. Scion formally withdrew its registration with the US Securities and Exchange Commission this week, signaling the fund's closure after a decade of operation.
The decision comes as valuations across equity markets remain elevated despite renewed volatility. On Thursday, the Nasdaq Composite slipped nearly two percent, yet its longer-term trajectory underscores how speculative enthusiasm has overrun traditional valuation benchmarks.
The index's forward price-to-earnings ratio sits near 30 times projected earnings, well above the ten-year average of roughly 25. For seasoned fundamental investors, such as Burry, the disconnect between price and underlying corporate value has made stock selection increasingly difficult.
Heavyweights like Nvidia have soared as investors bet that AI will transform industries from cloud computing to logistics... the gains, however, have also lifted several loss-making or thinly profitable tech firms, complicating the market's risk-reward balance.
This year's rally in technology shares has been driven primarily by optimism about artificial intelligence. Heavyweights like Nvidia have soared as investors bet that AI will transform industries from cloud computing to logistics. The gains, however, have also lifted several loss-making or thinly profitable tech firms, complicating the market's risk-reward balance. In one metric often cited by analysts, a group of 250 US stocks favored by short sellers has climbed more than 50 percent in 2025, leaving many contrarian investors deeply underperforming broader benchmarks.
Burry's recent regulatory filings revealed derivatives-based short positions against Palantir Technologies and Nvidia, wagers that would rise in value if share prices fell. Both bets have proved costly so far. Palantir has increased by about 130 percent this year as investors embraced its data analytics tools and AI integration strategy. At the same time, Nvidia continues to dominate the semiconductor sector as demand for its GPUs accelerates.
The retreat from Scion underscores a broader shakeout among prominent short sellers. Jim Chanos, long known for his skeptical approach to high-growth equities, has also wound down his hedge fund. Nate Anderson of Hindenburg Research has faced similar pressures in recent months amid a bull market that has rewarded momentum over caution.
For Burry, the decision marks the second time he has closed a fund amid perceived market excess. After his successful bets against subprime mortgage securities in the mid-2000s, he shuttered Scion Capital in 2008, opting to return investor capital rather than chase what he viewed as unsustainable gains. He later revived the firm under the Scion Asset Management name to pursue a value-oriented strategy.