Meet the S&P 500 stock that Michael Burry says could crash 50% (or more) 

Famed investor Michael Burry has been bearish on the S&P 500 for ages now. But the blue-chip index continues going up, proving him fallacious (at the very least thus far).

Regardless of this, the investor is doubling down on his AI-is-in-a-massive-bubble thesis. And he reckons this hyper-growth stock is susceptible to an enormous share worth crash.

Cassandra unchained

As a reminder, Burry was portrayed by British actor Christian Bale in The Massive Brief movie. There are numerous sensible scenes on this film, however my private favorite is when Steve Carell’s character is advised by a dancing stripper that she owns 5 homes and a apartment — all financed with adjustable-rate mortgages.

That’s when the penny drops that there’s a subprime mortgage bubble. Anyway, lengthy story quick (no pun supposed), Burry and the others have been proper and made a fortune.

At present, he sees one other bubble with AI and has launched a paid Substack known as ‘Cassandra Unchained’ to submit his analysis on this topic.

No room for hiccups

This week, Burry shared a chart figuring out a selected buying and selling sample in the share worth of Palantir (NASDAQ:PLTR). He believes it has breached a vital assist stage and could fall to $80, after which probably as little as $50.

With the share worth at the moment at $135, this means Palantir could crash by 50% or extra!

Lending credence to this view is the software program stock’s sky-high valuation. Proper now, its price-to-sales (P/S) ratio is round 45, whereas the ahead price-to-earnings (P/E) a number of is above 100.

Palantir has been pushed to those ranges by distinctive firm progress, which has fuelled a near-700% share worth rally since the begin of 2024. Nevertheless, at its present valuation, there’s completely no room for any earnings hiccups (a key threat).

Getting extra

Now, it ought to be remembered that Burry is speaking a few stock buying and selling sample. Against this, The Motley Idiot is targeted on long-term investing (5 years or extra). Over this time interval, such patterns typically quantity to nothing greater than distant zigs and zags on a chart.

Palantir closed the fourth quarter with $4.26bn of whole contract worth, a key software program bookings metric, which represented year-on-year progress of 138%. And administration expects 61% top-line progress in 2026.

Palantir’s ‘Rule of 40’ rating – that’s the firm’s income progress fee plus working margin – clocked in at an unimaginable 127%. In software program circles, hitting 40 is seen as wholesome for a rising enterprise (therefore the rule).

Maybe it ought to be doubled and renamed the ‘Rule of 80’ now Palantir has made a mockery of it!

If the stock have been to crash anyplace close to $70, I’ll add it to my Shares and Shares ISA. At this stage, the forward-looking P/E a number of could be round 40, primarily based on forecasts for 2027.

For a corporation as worthwhile as this, I believe that would show good worth. As a result of even when Burry is true and an AI bubble pops, it’s unlikely that corporations and organisations will immediately cease utilizing Palantir’s Foundry and AIP (Synthetic Intelligence Platform). These are serving to clients make higher choices and change into extra environment friendly and worthwhile.

With the stock down 35% since November, I’m positively getting extra . However I’m not prepared to purchase it simply but.