AI topic is getting hotter, "big short" operation is going against the trend: the latest bullish positions focus on the "regulatory rebound", buying gambling stocks DraftKings and Flutter.

Prototype character Michael Burry of the movie "The Big Short" expressed that he recently invested in regulated US domestic sports betting operators DraftKings (DKNG.US) and Flutter Entertainment (FLUT.US), expecting that regulatory agencies will eventually crack down on prediction market trading platforms such as Polymarket, which face significant competition pressure from emerging competitors. Michael Burry stated on Wednesday that he bought a full-scale position, allocating funds roughly 60% to Flutter and 40% to DraftKings; he bought Flutter at around $107 per share and bought DraftKings in the mid-$26 range. He mentioned that he may eventually increase each position to a full independent stock position. This trade by Burry on DraftKings and Flutter is a rare bullish move by the "Big Short" title holder: he bought a full-scale position, approximately 60% in Flutter and 40% in DraftKings, with purchase prices of around $107 per share for Flutter and just over $26 per share for DraftKings; his core judgment is that prediction markets are currently benefiting from a regulatory and tax gap in the financial and gambling industry close to high regulation and taxation, which will likely be included in the regulatory and taxation system in the future, weakening their competitive impact on compliant sports betting companies. In other words, this is not chasing high growth momentum, but betting on the valuation recovery of traditional compliant platforms after the end of regulatory arbitrage. His recent bearish moves have been more focused on crowded trades related to AI computing power infrastructure and AI semiconductor capital expenditure cycles, but not all targets are purely AI computing power companies. Several media reports have revealed that Michael Burry expresses bearish positions on NVIDIA Corporation, Tesla, Inc., Carter's Incorporated, Applied Materials, and iShares Semiconductor ETF (SOXX) through put options or short positions, extending the due date for iShares Semiconductor ETF to March 2027; he also disclosed a short position on Micron, interpreted by the market as a bearish stance on storage and semiconductor manufacturing equipment popular stocks driven by the AI infrastructure boom and a systematic doubt about capital expenditure on AI infrastructure and the fundamental prospects of high-valuation tech stocks. Previously, he also disclosed bearish put options positions on NVIDIA Corporation and Palantir through 13F filings. Betting on Regulatory Resurgence, Burry Buys DraftKings and Flutter The globally renowned investor who rose to fame for accurately predicting the 2008 US real estate collapse and subprime crisis expressed that both companies are long-term attractive US enterprises, but their stock prices are dragged down by the competitive nature brought by the rapid expansion of prediction markets. These platforms are increasingly offering binary bet-style contracts based on individual events, and the US Commodity Futures Trading Commission claims jurisdiction over this. The federal agency is currently in legal action with multiple states around who can regulate prediction markets. These bet contracts have also successfully circumvented state gambling taxes in the past. Michael Burry stated in a Substack post on Wednesday, "I don't think the political climate will tolerate this." "Prediction markets exist in a loophole adjacent to a highly regulated and taxed financial sector. Over time, prediction markets will inevitably be included in regulation and taxation." DraftKings' stock price has fallen about 45% from its 52-week high set in September last year, while Flutter has dropped 65% from its peak in August. He wrote, "DraftKings, as an operating enterprise, is experiencing a positive turning point, and the specific value lies in the immediate transformation I foresee." "Flutter has been hurt by capital misallocation in the past, but fundamentally, it is a very good gambling type operating enterprise with excellent market scale." Michael Burry pointed out that both companies have also begun exploring their own prediction market products, which could position them favorably regardless of how the regulatory landscape evolves. Platforms like Kalshi and Polymarket, which are prediction markets, have become popular worldwide since the 2024 US presidential election, when almost everyone was keen on betting with real money on the paid prediction market platform Polymarket on whether Trump or Harris would win the US presidential election, signaling the trend of "everything can be bet" sweeping the financial market. Bets on the Iran war pushed Polymarket GEO Group Inc political contracts to record highs, highlighting the trend of "everything can be bet" in prediction markets, but rapidly touching regulatory and ethical red lines. To a large extent, prediction markets have become increasingly popular among retail investors in the past year because they offer a new way to bet on significant events (such as whether the US government will shut down again), sports events, and cryptocurrency prices. These are still the largest business categories on Polymarket and Kalshi, but these companies have long promoted themselves as legal trading venues for political and global events. Prediction markets have now expanded to cover a wide range of topics such as politics, sports, economic data, weather, GEO Group Inc events, and more. Prediction markets enter the sports arena in the form of "event contracts," attracting trading volumes in some states even without legal sports betting, thus becoming an important source of incremental revenue for platforms like Kalshi, while also sparking compliance disputes and attention at the state level. More importantly, some Wall Street investment institutions and professional trading funds have started using them to bet/hedge macro and company event probabilities (such as the Federal Reserve's monetary policy, the success or failure of large mergers and acquisitions) because prediction market contract structures are binary and express more purity. As the AI semiconductor theme gets overheated and stuck due to crowdedness and high leverage, funds are starting to shift from high-crowded AI computing power betas to cash flow defense, and the main theme of Wall Street strategies is increasingly transitioning from AI computing power infrastructure to broader high-quality fundamental assets significantly underperforming in tech. Wall Street financial giant Jefferies Financial Group Inc. (Jefferies) suggests that investors hold high-quality, low-profit-taking pressure, low-crowded stocks in the face of a possible major tech stock pullback in the summer, mainly because market volatility is significantly increasing amid the clearing out of crowded trades in AI semiconductor infrastructure and deleveraging controversies, as well as concerns over AI revenue pathways. Burry's latest investment portfolio strategy is summarized by analysts as shorting the narrative-surplus, overheated valuation, and possibly over-premature capital expenditure of the AI computing power infrastructure chain, as well as buying gambling cash flow assets that have been underestimated by the market but still have a moat around their business models. Shorting Micron, NVIDIA Corporation, Applied Materials, and Semiconductor ETF SOXX expresses a skeptical stance on the supply expansion-profit expectations-overvalued AI computing hardware chain; shorting Tesla, Inc., and Carter's Incorporated corresponds to questioning the high valuation tech narrative driven by AI/Siasun Robot&Automation/autonomous driving and the overspill trading themes of AI infrastructure, industrial capital expenditure cycles. Buying Flutter and DraftKings is a reverse move to buy industry leaders that have been hit by prediction markets but still have scale, licenses, users, and tax compliance advantages. When the market prices themes like AI, semiconductors, Siasun Robot&Automation, intelligent body infrastructure as "infinite growth," Burry is obviously more focused on oversupply, capital expenditure return rates, extreme valuation, and regulatory reflexivity; when the market excessively punishes traditional leaders due to new competitors, he instead seeks valuation recovery brought by institutional return. In other words, Burry is not merely bearish on the market currently but engaging in a relative value trade of "selling the AI frenzy premium and buying the underestimated gambling cash flow assets with still-moated business models."