History repeats itself or is it just a coincidence? First Burry shorted, then Deutsche Bank hedged, "The Big Short 2.0" is truly being reenacted!

A scenario strikingly similar to the eve of the 2008 financial crisis seems to be unfolding around the investment frenzy in artificial intelligence.

During the 2008 financial crisis, Michael Burry, the character behind the movie "The Big Short," rose to fame by shorting the real estate bubble, while Deutsche Bank traders quietly marketed credit default swaps (CDS) to clients, allowing investors to hedge against risks in the real estate market.

Today, Michael Burry is publicly bearish and making significant bets, with 80% of his positions shorting NVIDIA and Palantir. Following this, Deutsche Bank has begun considering shorting AI stocks to hedge against the enormous loan risks in the data center sector and is exploring similar hedging tools, with the underlying assets shifting from real estate mortgages to AI data center loans.

These "coincidences" are playing out directly, as global regulators issue warnings about the AI asset bubble. The Monetary Authority of Singapore has explicitly pointed out that the technology and AI sectors exhibit "relatively tight valuations," warning that a reversal of market optimism could trigger a "sharp correction." The Korea Exchange has also issued a rare "investment caution notice" regarding chipmaker SK Hynix. CEOs of Goldman Sachs and Morgan Stanley have also issued warnings that U.S. stock valuations are too high and could see at least a 10% correction!

"The Big Short" issues another warning, 80% position betting on AI collapse

Investor Michael Burry, who gained fame for accurately predicting and shorting the U.S. subprime mortgage crisis, is putting his warnings about the AI bubble into action with aggressive short positions. Recent regulatory filings show that approximately 80% of the holdings managed by his Scion Asset Management are concentrated in shorting Palantir and NVIDIA, with a notional value exceeding $1 billion.

The filings reveal that Burry's put options on Palantir have a notional value of up to $912 million, equivalent to 5 million shares; the notional value of put options on NVIDIA reaches $186 million. However, the filings did not disclose key details such as the actual premiums paid for the options, strike prices, and expiration dates.

Before publicly disclosing his positions, Burry posted a mysterious message on social media, quoting a classic movie: "Sometimes we see bubbles. Sometimes we can take action. Sometimes the only winning strategy is not to play the game." He hinted that the returns on AI investments are too low, similar to the excessive capital expenditures on fiber optics during the internet bubble, and that many leading companies in the current AI craze will ultimately collapse.

Burry's strategy mirrors his famous move before the subprime crisis, where he used credit default swaps (CDS) to short the U.S. real estate market amid widespread optimism. Now, he is once again targeting the AI sector, which is viewed as the focal point of market frenzy.

However, it is worth noting that due to the continued rise in the stock prices of both companies after the filing date, Burry's short positions are facing significant paper losses. The market is closely watching whether this legendary investor can replicate his past success.

Deutsche Bank's "two-pronged approach": lending on one hand, seeking hedges on the other

Driven by demand for AI, data center financing has become a core bet for Deutsche Bank's investment banking business. According to a senior executive at the bank, it has "made significant bets" in this area. Deutsche Bank primarily provides loans to companies serving "super-scale" tech giants like Alphabet, Microsoft, and Amazon, with these loans typically secured by long-term service contracts Commitment to stable returns.

In recent months, Deutsche Bank has provided debt financing to Swedish group EcoDataCenter and Canadian company 5C, helping them raise over $1 billion for expansion. Although the bank has not disclosed the specific total amount of loans to the industry, it is estimated to be in the billions.

However, according to a recent report by the Financial Times, discussions about hedging risks have emerged within Deutsche Bank in this context. The options being evaluated by the bank include two levels:

First, directly shorting a basket of AI-related stocks to profit during market downturns; second, through a derivative trade known as "Synthetic Risk Transfer" (SRT), packaging and selling part of the default risk of loans to external investors.

This move has attracted significant market attention not only due to its cautious stance but also because of its historical similarities. During the 2008 financial crisis, it was Deutsche Bank trader Greg Lippmann who pushed for the establishment of a massive CDS market, allowing investors to short real estate.

Some market observers point out that the SRT structure currently being considered by Deutsche Bank, in terms of the logic of packaging and layering risk asset pools, "looks and sounds very much like" the collateralized debt obligations (CDOs) of that time, raising concerns about the potential risks behind it.

However, hedging AI risks is not an easy task. Shorting a basket of AI stocks in a continuously booming market is costly. Synthetic Risk Transfer transactions also face challenges, requiring a sufficiently diversified loan pool to obtain ratings, and investors may demand higher returns to take on these risks.

Notably, Deutsche Bank analysts released a report in September this year stating that concerns about an AI bubble have been exaggerated, asserting that "the bubble about the bubble has already burst." This internal contradiction highlights the complex situation faced by large financial institutions in the current market environment