The RBA rained on the Melbourne Cup parade this week.
Rates on hold. Inflation sticky. A risk that the housing market could get stuck.
But while everyone focused on Australia’s rate drama, the real story for me, was unfolding ~10,000 kilometers away in New York.
Michael Burry just bet against Nvidia!
The man who called the housing crash
You know Burry from The Big Short.
He made his name shorting subprime mortgages between 2006 and 2008 when everyone else thought the housing market was invincible.
Now he’s buying put options on Nvidia. (Betting on a fall)
According to filings released Monday, Burry’s Scion Asset Management disclosed bearish wagers on both Nvidia and Palantir.
Peter Thiel’s Palantir has been a market darling – I like it a lot, but gee it’s run hard.
Up ~153% year to date.
Not everyone thinks the run will continue, Burry included.
So days earlier, Burry posted a cryptic image on X showing his character from The Big Short with the warning: “Sometimes, we see bubbles.”
You could call it broken clock theory or a true sign of the end times, depends who you ask.
But the timing matters.
Nvidia just crossed $5 trillion in market cap. That’s not a typo. Five TRILLION dollars.
I think Burry’s bet is purely about concentration risk – when a single company soaks up a disproportionate amount of liquidity.
And in the last 24 hours, Burry posted this:
Source: X
Taken together, the charts offer a glimpse into Burry’s vision of a bubble bursting.
The concentration conundrum
Nvidia now represents ~8% of the entire S&P 500.
That’s the highest concentration for any single stock since 1981.
Apple peaked at ~7% in 2023. During the dot-com bubble, Microsoft and GE both topped out near ~4%.
Even IBM at its 1984 peak only hit ~6%.
So when you invest $100 into an S&P 500 index fund today, $8 goes straight into Nvidia.
The Magnificent Seven as a group now make up ~37.4% of the S&P 500, with a combined market cap exceeding ~US$22 trillion.
That means more than a third of the index rides on seven tech stocks.
Here’s where it gets wild.
Nvidia, sitting at ~US$5 trillion, is worth 7.4 times the combined market cap of the world’s 10 largest mining companies.
That’s: BHP, Rio Tinto, Vale, Glencore, Southern Copper, Zijin, Newmont, China Shenhua, Ma’aden, and Fortescue.
All of them together come to $684 billion.
Nvidia is worth 735% of that.
Think about how crazy that is. AI chips vs the things that make AI possible.
This isn’t the four horsemen
Now, before everyone panics, let’s be clear.
Burry isn’t necessarily betting on a full-blown market collapse.
Put options can be hedges. They can be part of spread trades.
Bury’s filing doesn’t show the short side of any spreads, so we don’t know if this is an outright bearish bet or part of a more complex strategy.
His first-quarter filing included a disclosure that puts “may serve to hedge long positions.” Monday’s filing didn’t include that language.
But here’s what we do know.
At $5 trillion, Nvidia trades on expectations that are baked in for years.
CEO Jensen Huang just announced US$500 billion in AI data center orders for 2026.
That’s extraordinary.
But it also means any stumble, any delay, any hint of slowing demand gets punished disproportionately.
Markets don’t need Armageddon for a rotation.
They just need a reason to take profits and look elsewhere.
Rotation, not collapse
Which brings us back to commodities.
The world’s 10 largest mining companies, worth $684 billion combined, supply the physical materials that underpin everything.
Copper for data centers and electric vehicles.
Iron ore for infrastructure.
Lithium for batteries.
Gold as the eternal hedge.
These companies have been left behind during the AI rally.
But commodity cycles don’t disappear. They rotate.
Gold just hit record highs in 2025, up ~40%. Copper is projected to see demand growth from 23.5 million tonnes in 2019 to 31.1 million tonnes by 2030.
Lithium crashed in 2024 but battery storage demand exploded 50% in 2025 as the market shifted from EVs to grid-scale storage.
That lithium price edged up again too:
Source: Trading Economics
Central banks are cutting rates. China is stimulating. The US and China just agreed to a temporary trade truce.
Liquidity is flowing back into the system.
And when liquidity flows, it doesn’t stay concentrated in one sector forever.
It rotates.
The case for commodities
Burry’s bet might not be about Nvidia collapsing.
It might be about Nvidia peaking.
At ~8% of the S&P 500, there’s not much room left to grow its weight without becoming the entire index.
Commodities are waiting for the market to remember they exist.
The ASX is loaded with them.
Copper developers in proven jurisdictions. Uranium juniors advancing toward production. Lithium plays with world-class resources.
When commodity cycles turn, these stocks can re-rate disproportionately.
Not because tech collapses into oblivion, but because capital rotates.
Sidebar: Buried in the news today were the obituaries for George Bush’s famous/infamous Vice President, Dick Cheney.
But like George Bush on the golf course, I reckon commodities are about to take a big swing:
Best Wishes,
Lachlann Tierney,
Australian Small-Cap Investigator and Fat Tail Micro-Caps
***
Murray’s Chart of the Day – ASX 200
Source: TradingView
After seven months of watching markets do nothing but go up, it feels like we are entering a new phase.
The weekly trend in the ASX 200 is weakening, with another weekly sell pivot confirmed last week and prices heading below the 20-week simple moving average this week.
Look at the indicator at the bottom of the chart.
That’s the Relative Strength Index which is a momentum indicator. It compares the average gains to the average losses over the last 14 trading periods.
I don’t think it is a useful indicator for looking at overbought or oversold conditions.
But where it can be useful is when you are looking for what is called bullish and bearish divergence.
The chart above has bearish divergence.
That is when the price of the market you are looking at breaks out above a former high, but the RSI indicator fails to follow through and creates a lower high on the indicator.
At extremities it can be a useful sign that momentum could be waning, and a correction is close.
I have placed two black arrows in the chart above so you can see in the top chart that prices broke out to a new all-time high over the last few weeks, but the RSI indicator below didn’t confirm the breakout.
You want the RSI to be in an overbought situation (above 70) which it was on the first peak in prices in August.
The weekly sell pivot that occurred last week completed the set up. The follow through selling this week and failure below the 20-week moving average increases the odds that we are on the verge of some type of correction.
The weekly trend is close to shifting into a downtrend and I have circled the last time that happened in the chart above.
I’m not sure how far we will fall on this correction, but another 200 point fall to February’s high near 8,600 seems like a fair bet in the immediate future.
Regards,
Murray Dawes,
Retirement Trader and International Stock Trader
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