Wall Street’s most famous contrarian, Michael Burry, is back in the spotlight. Known as the "Big Short" investor who predicted the 2008 financial crisis, Burry has reignited his long-running feud with Tesla (TSLA-US). After closing his hedge fund, Scion Asset Management, in November, Burry has shifted his voice to Substack, launching his newsletter Cassandra Unchained. His first major target: Tesla’s valuation, which he calls "absurd" and a slow-motion exploitation of minority shareholders.
Tesla’s 209x Price-to-Earnings Ratio
At the heart of Burry’s critique is Tesla’s sky-high valuation. According to LSEG data, Tesla’s P/E ratio as of December 1, 2025, stands at 209 times earnings. For context, the S&P 500 average is about 22, while Tesla’s own five-year average is 94. By Burry’s measure, Tesla is trading at more than double its historical premium and nearly ten times the broader market.
"Tesla’s market capitalization is still ridiculously overvalued today, and this irrational state has persisted for far too long," Burry wrote. For a value investor, this reliance on narrative rather than profits is a textbook bubble.
Equity Dilution: The Hidden Cost
Beyond valuation, Burry highlights equity dilution as a silent drain on shareholder value. He estimates Tesla dilutes holdings by about 3.6% annually through new share issuances and employee stock options. Without significant buybacks, retail investors see their ownership shrink each year.
The biggest beneficiary, Burry warns, is CEO Elon Musk, whose controversial compensation package could deliver stock awards worth up to $1 trillion over the next decade if operational milestones are met. "This is a wealth transfer," one analyst summarized, noting that when profit growth lags equity expansion, late-arriving retail investors bear the cost.
From Hedge Fund Manager to Financial Influencer
Burry’s critique of Tesla is not new. In 2021, he famously bought Tesla put options, though he later closed the position. What’s different now is his platform. By shuttering Scion Asset Management, Burry has freed himself from regulatory constraints, allowing him to speak more bluntly as a financial influencer.
His skepticism extends beyond Tesla. In recent weeks, Burry has attacked the broader AI investment boom, questioning whether companies like Nvidia and Palantir can truly monetize massive capital expenditures. He accuses tech giants of using accounting maneuvers to mask weak profitability, warning that investors are being lulled into complacency by hype.
Market Sentiment: Faith vs. Data
Despite Burry’s warnings, Tesla’s stock barely flinched, rising 0.10% to $430.61 on December 1. This resilience reflects investor confidence in Tesla’s AI initiatives, including Robotaxi services, which many believe justify a higher margin of error.
Yet caution is creeping in. JPMorgan analysts note that Tesla’s car sales face intense competition from Chinese automakers, squeezing hardware margins. If AI revenues fail to materialize quickly, Tesla’s P/E ratio above 200 could face sharp correction risk.
This tension—between faith in disruptive narratives and hard financial data—defines the market mood at the end of 2025.
Lessons from Burry’s Track Record
Burry’s reputation stems from his prescient call on the subprime mortgage crisis. But not all his bearish bets have landed. His skepticism of semiconductors, for instance, proved premature. Still, his role as a market whistleblower remains influential.
For investors, Burry’s critique may not be a sell signal, but it is a reminder to reassess portfolios. When growth depends on constant dilution and valuations defy gravity, the risk of a painful correction rises.
The Bigger Picture: AI Bubble Concerns
Burry’s Tesla critique dovetails with his broader warnings about the AI bubble. He argues that Wall Street is underestimating the risks of massive AI-related CapEx, particularly when accounting practices obscure true profitability. His view is that investors are chasing stories—AI breakthroughs, autonomous driving, cloud infrastructure—without sufficient scrutiny of earnings.
This skepticism resonates with historical parallels. Just as the dot-com boom of the late 1990s produced spectacular winners and losers, today’s AI frenzy may leave some companies overextended.
Investor Takeaways
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Valuation Check: Tesla’s 209x P/E ratio is far above market norms, raising bubble concerns.
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Dilution Risk: Annual equity dilution erodes shareholder value, benefiting insiders more than retail investors.
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AI Uncertainty: Monetization of AI investments remains unclear, making profitability projections risky.
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Portfolio Discipline: Burry’s warning is less about timing exits and more about reassessing exposure to hype-driven stocks.
Conclusion: Alarm Bells Ring Again
Michael Burry’s latest salvo against Tesla underscores his enduring role as Wall Street’s contrarian voice. Whether his warnings prove prescient or premature, they highlight the risks of chasing valuations untethered from fundamentals.
As 2026 approaches, investors face a choice: continue betting on disruptive narratives like AI and autonomous driving, or heed Burry’s call to focus on profitability and shareholder value. The alarm bells have rung—whether anyone listens remains to be seen.