Contrarian investor Michael Burry gained fame from The Big Short as one of a handful of investors in the movie that bet big on the housing crash in 2008 and won. Burry collected about $100 million for himself with his bet against subprime mortgages and made more than $700 million for his investors.
Now, Burry, who's believed to be a billionaire, is still an active investor, though he has transitioned his Scion Asset Management to a family office, and he's now betting big against Palantir (NASDAQ: PLTR), the deep data analytics company now best known for its AI platform.
Burry bought long-dated put options on the tech stock in the third quarter, spending roughly $9.2 million to do so.
This week, he stepped up his attack on Palantir, saying in a now-deleted post on X that "Anthropic is eating Palantir's lunch."
Those comments, which came just as Anthropic said its new Claude Mythos AI model can identify software vulnerabilities and is too powerful to be released, seemed to be having an impact on Palantir.
Over Wednesday and Thursday, Palantir stock lost 13%, even as the broad market surged on Wednesday on news of the ceasefire. However, software stocks plunged on Thursday in response to the new threat from Anthropic.
Image source: Getty Images.
What Burry had to say about Palantir
Burry backed up his argument by noting that Anthropic's annual recurring revenue (ARR), which is a proxy for run rate revenue, increased from $9 billion to $30 billion. The billionaire attributed that growth to taking market share from traditional software companies, saying that businesses are choosing Anthropic for its "easier, cheaper [and more] intuitive" product.
Burry also went after Palantir's core, arguing that the analytics stock depends on outside large language models (LLMs) like Anthropic to make its AI platform work. During Anthropic's kerfuffle with the Pentagon earlier this year, Palantir had to remove Claude from its systems and rebuild the platform, a vulnerability.
In its 10-K report, Palantir doesn't discuss Anthropic specifically, but says its AI platform provides connectivity to third-party LLMs.
Arguably, what makes Palantir's AI platform and what's driven its growth is the utility of the LLMs it works with, meaning that the value should be accruing to the owners of those LLMs, like Anthropic and OpenAI, rather than Palantir itself.
That's the argument Burry is making, at least, and that seems to make sense. That's why software stocks have plunged in recent weeks. Investors see new tools from Anthropic as providing an alternative to traditional enterprise software, and that extends to Palantir.
NASDAQ: PLTR
Key Data Points
Is Palantir in trouble?
Based on Palantir's recent results, the business hasn't shown any kind of vulnerability to competition from Anthropic or anyone else. Its revenue growth rate has accelerated in each of the last ten quarters, reaching 70% in the fourth quarter.
However, Palantir's valuation has long made it vulnerable to this kind of pullback as the stock is now by more than a third from its peak last October. Even after that sell-off, though, Palantir still trades at a price-to-sales ratio of 85, which makes it the most expensive stock on the S&P 500 by far.
Palantir isn't alone in the software sell-off either, as SaaS stocks are falling across the board, and the Anthropic threat shows no signs of slowing down. At this point, Palantir's business results are still strong, but the same could be said of many of its SaaS peers that are also posting impressive growth.
It may take more than just results to rewrite the narrative for Palantir at this point, especially as the company clearly relies on LLMs like Anthropic.
Given its valuation, there's plenty of room for the stock to fall further, especially if Anthropic continues to make advances and release new products.
