Michael Burry Goes Long on Adobe

This move represents a significant pivot for Burry, whose Scion Asset Management was heavily short on the AI sector in late 2025. The firm held put options against AI darlings Nvidia and Palantir valued at a notional $1.1 billion, making his long position on AI-battered Adobe a sharp and noteworthy reversal. Adobe's stock has been under significant pressure, trading near its 52-week low and down roughly 42% from its 52-week high of over $453. This decline is largely attributed to investor fears that generative AI tools from competitors like Midjourney and Canva could disrupt its core creative software business. The sell-off has pushed Adobe's valuation to its most attractive level in years. The stock's price-to-earnings (P/E) ratio now stands at approximately 16, a steep discount from its five-year average of over 40. This valuation is a key component of the bull thesis, suggesting the market has overly punished the company. Despite the stock's performance, Adobe's financials remain robust. The company generated a record $9.85 billion in free cash flow for the 2025 fiscal year, a 25% increase year-over-year. This strong cash generation underscores the stability of its subscription-based revenue model. In response to the AI threat, Adobe has integrated its own generative AI, Firefly, into its Creative Cloud suite. Firefly, which is trained on Adobe's licensed stock library to be commercially safe, has seen rapid adoption, with users generating over 3 billion images in its first few months. The investment comes as Adobe faces regulatory headwinds. The Federal Trade Commission (FTC) filed a lawsuit in June 2024, alleging the company uses hidden early termination fees to trap customers in year-long subscriptions and makes the cancellation process overly difficult.