Michael Burry Vouches for Beaten-Down Adobe in Latest SaaS Analysis: 'The Stock Offers an Aggressive Moat'

Michael Burry is known for betting against the US real estate market during the global financial crisis to net hundreds of millions of dollars in profits. His contrarian bets and strategic foresight have created an investor community that remains in awe of his contrarian bets through the decades. He bought GameStop before it was a meme stock and even invested in water, predicting future scarcity.

Even eBay rejected GameStop's $55 billion takeover offer after Burry criticised the move, stating he sold all his GameStop shares because they simply can't take over eBay or compete with giants like Amazon.

After recently disclosing buying AI giant Adobe, Burry explained why he chose the beaten-down stock despite expressing fears about an AI bubble.

In the second installment of a six-part series on Substack dissecting US software stocks released on Thursday, Burry focused on productivity tools and the cybersecurity space, including stocks like Adobe, Intuit, Autodesk, Scaler, Palo Alto Networks, and CrowdStrike.

Among these stocks, Burry believes that Adobe looks the most promising in the group. The stock is down a staggering 31%, indicating that Burry's play could be founded on value investing principles of buying fundamentally robust companies at a cheap price.

Burry's bullish view on Adobe may be due to the company's momentum with Firefly AI offerings, growing enterprise adoption, and integration across creative workflows. The Big Short investor also highlighted Adobe's advantage in managing proprietary customer IP and its vast ecosystem with 850 million monthly active users.

'Those 850 million monthly active users plus Adobe's wide distribution across and within Anthropic, OpenAI, Google, and Microsoft amount to an aggressive moat. If and when AI agents try to compete, Adobe still puts forth platform-agnostic connections across all four foundation-model ecosystems and has effective control of the playing field,' Burry had explained.

Although bullish on Adobe, Burry noted that competition from AI-native tools like Canva and Figma presents a real threat. However, Adobe's ecosystem positions it to adapt and potentially benefit from the AI transition rather than be displaced by it.

One important reason Burry stays away from stocks like Intuit, Autodesk, and Unity Software, despite viewing them as operationally robust businesses with defensible positions against AI, is because of their high valuations.

Burry on Cybersecurity Companies: 'They Are a Different Animal'

Burry remains skeptical of cybersecurity companies, especially Zscaler, Plato Alto Networks, and CrowdStrike, arguing that they remain vulnerable to leading AI models, such as Anthropic's Mythos.

'Cybersecurity companies are a different animal – the threat of advanced frontier autonomous AI models such as Mythos from Anthropic would seem to increase the business case for cybersecurity. And it is,' Burry had noted on Substack.

The former hedge fund manager had also boosted stakes in companies like the largest Latin American e-commerce marketplace provider MercadoLibre, payments provider PayPal, and athletic apparel firm Lululemon Athletica.

He had explained that these stocks are part of the 'mass whale fall' phenomenon happening away from the main spectacle.

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