'Ridiculously Overvalued': 'Big Short' Investor Michael Burry Revives Short Bet Against Tesla Over AI Boom

Investing titan Michael Burry called Elon Musk's Tesla Inc. "ridiculously overvalued" in a new post Substack release earlier this week, days after he voiced concerns about the current artificial intelligence boom.

The 'Big Short' fame hedge fund veteran said, "Tesla's market capitalization is ridiculously overvalued today and has been for a good long time," Burry wrote in his Substack newsletter 'Cassandra Unchained' on Sunday.

Burry — best known for correctly betting against the subprime mortgage securities during the 2008 financial crisis-led US housing market crash — estimated that the electric-vehicle maker’s stock-based compensation dilutes shareholders by 3.6% per year, with no buybacks to offset it.

According to Reuters, the pay package could get the Tesla CEO as much as $1 trillion in stock over the next decade, provided Musk, already the world's richest man, ensures the company achieves a series of milestones.

Tesla is under heavy scrutiny over Musk’s pay award, which was approved by shareholders last month. Norway’s sovereign wealth fund, Norges Bank Investment Management, voted against Musk's pay package, saying it is too large and risky.

The bearish view against Tesla is not Burry's first. His hedge fund Scion Asset Management disclosed a large bearish bet via options on Tesla in May 2021. He later told CNBC in October 2021 that he was no longer betting against the company and that his position was just a trade.

Burry is not the first to call Tesla overvalued. The company's shares trade at over 250 times its earnings, far higher than other carmakers, and fellow famed short-seller Jim Chanos also said in 2023 that Tesla was overvalued.

The 'AI bubble' essentially refers to the possibility of the AI boom having outrun the fundamentals, where the stock valuations of AI-linked tech companies are seen as inflated as compared to their profits and revenue.

If the AI bubble bursts, Wall Street may witness a crash which could have spillover effects to global markets as well. However, Musk has repeatedly hit out against Tesla's critics and short sellers, predicting that the EV automaker will become the most valuable company on the planet.

Burry launched 'Cassandra Unchained' in November, saying that the paid newsletter had his "full attention" after he closed his hedge fund Scion Asset Management and returned capital to investors. Burry's bet against the housing market in 2008 was famously depicted in Michael Lewis's book "The Big Short" movie and its film adaptation.

Bloomberg data shows Tesla shares have risen 6.5% this year, much lower than the 21% jump in the Nasdaq-100 Index, as cited by Bloomberg. The EV giant's shares trade at over 250 times its earnings, far higher than other carmakers. The stock has gained over 20% in the last one year and surged 115% in five years.

Analysts at brokerage BNP Paribas from $307.00 to $313.00 in a research note, MarketScreener reported. BNP Paribas' price objective would suggest a potential downside of 27.29% from the stock's current price.

Tesla reported a revenue of $28.10 billion for the third quarter. The EV firm had a return on equity of 6.61% and a net margin of 5.51%.The company's quarterly revenue was up 11.6% on a year-over-year basis.