The Big Short Investor Sets His Sights on Tesla

Michael Burry, the investor who made his reputation betting against the U.S. housing market before it collapsed in 2008, has turned his critical eye toward Tesla Inc. (TSLA). In a blog post published Monday, Burry didn't mince words about the electric vehicle maker's valuation.

"Tesla's market capitalization is ridiculously overvalued today," Burry wrote, noting that the company's market cap and valuation have been inflated for quite some time. It's a bold claim against one of the most closely watched stocks in the market, and coming from someone with Burry's track record, it's worth paying attention to.

The criticism goes beyond just a gut feeling about the stock price. Burry pointed to specific concerns about how Tesla treats its shareholders, starting with CEO Elon Musk's controversial pay package. That trillion-dollar compensation plan, which investors approved last month despite plenty of pushback, will lead to stock dilution according to Burry. He's not alone in that worry—other entities raised similar red flags before the shareholder vote.

But the dilution problem doesn't stop there. Burry calculates that Tesla dilutes shareholders at approximately 3.6% annually through stock-based compensation for employees, without any buyback program to offset the impact. That's real money coming out of existing shareholders' pockets over time.

Taking Shots at the 'Elon Cult'

Perhaps the most provocative part of Burry's commentary targeted Musk's most devoted supporters. He suggested that they have a pattern of jumping from one hyped initiative to another, always staying bullish until actual competition materializes.

"As an aside, the Elon cult was all-in on electric cars until competition showed up, then all-in on autonomous driving until competition showed up, and now is all-in on robots — until competition shows up," Burry said. It's a pointed observation about how enthusiasm might be driven more by Musk's ability to capture imagination than by sustainable competitive advantages.

Interestingly, Burry didn't reveal whether he's actually betting against Tesla with real money, though his willingness to publicly criticize the company suggests he's at least thought about it.

A History of Skepticism Toward Tech Darlings

Tesla isn't the first high-flying tech company to draw Burry's skepticism. He's been vocally critical of Palantir Technologies Inc. (PLTR) and chipmaker Nvidia Corp (NVDA), backing up his words with actual short positions. SEC filings showed his bets against both companies were valued at $912.1 million and $186.58 million, respectively.

Burry has also drawn parallels between the current artificial intelligence boom and the dot-com bubble of the early 2000s. Given how that earlier bubble ended, it's not exactly a comforting comparison for today's AI-focused investors. The investor recently closed down his fund, Scion Asset Management, though he continues to share his market views publicly.

Meanwhile, Tesla Faces Real-World Challenges

While Musk talks about ambitious plans to put AI datacenters in space and predicts convergence between his various enterprises—Tesla, SpaceX, and xAI—the electric vehicle business faces some uncomfortable realities on the ground. During a recent interview, Musk called Tesla a world leader in "real-world AI," emphasizing the company's broader ambitions beyond just making cars.

But sales numbers tell a different story. Tesla has seen declining sales across multiple regions globally, with recent data showing a nearly 50% drop in European sales. That's a significant problem for a company whose valuation assumes continued growth and market dominance.

The disconnect between Tesla's sky-high valuation and its current sales trajectory is precisely the kind of gap that attracts skeptics like Burry. Whether he's right about Tesla being "ridiculously overvalued" will depend on whether Musk can deliver on those orbital ambitions or whether, as Burry suggests, the competitive reality eventually catches up.

Price Action: TSLA slipped 0.01% to $430.14 at market close, declining an additional 0.36% to $428.60 in after-hours trading, according to market data.