- Michael Burry, famed for predicting the 2008 crash, warns of a growing AI bubble.
- His firm has made billion-dollar bets against Nvidia and Palantir.
- Burry argues that AI valuations far exceed realistic long-term earnings.
- Market insiders share his view that AI spending is outpacing true demand.
Michael Burry, the investor immortalized in The Big Short, is once again making waves on Wall Street. Known for foreseeing the 2008 financial meltdown long before it hit, Burry has now turned his attention to the artificial intelligence boom. His latest trades show deep concern that the AI market may be dangerously overvalued.
Recent filings from his firm, Scion Asset Management, reveal massive option positions linked to Nvidia and Palantir. Together, these bets carry a notional value of more than one billion dollars. They suggest that Burry sees serious downside risk in companies viewed as leaders of the AI revolution.
Investors are paying close attention. When someone with Burry’s track record makes a move, it tends to shake markets. His timing and boldness have once again sparked debate about whether the AI surge is built on real fundamentals or simply another bubble inflating before the inevitable correction.
Why Burry is worried about the AI frenzy
Burry’s reasoning is familiar to anyone who remembers the dot-com era. He believes current valuations in the AI sector have sprinted far ahead of actual business performance. Billions are being poured into data centers, chips, and software tools, but the long-term profitability of these ventures is still uncertain.
He sees parallels between today’s AI hype and past speculative bubbles. Companies are forming intricate partnerships, trading equity stakes, and financing each other’s projects in ways that create a feedback loop of optimism. This circular behavior, he argues, drives valuations higher without producing clear proof of revenue growth.
According to Burry’s analysis, AI enthusiasm has become self-reinforcing. Investors expect endless growth, so companies expand aggressively to meet that expectation, which in turn fuels even higher valuations. It is a cycle that can continue until confidence fades—and when it does, history suggests the fall can be swift.
Nvidia, Palantir, and the center of the storm
Burry’s focus on Nvidia and Palantir is not accidental. Both firms sit at the very heart of the AI boom. Nvidia supplies the powerful chips that run advanced AI models, while Palantir provides data analytics platforms now marketed as key tools for AI-driven decision making.
Over the past two years, their stock prices have soared as investors rushed to gain exposure to artificial intelligence. For many, these companies symbolize the promise of a new technological era. But for Burry, they represent a concentration of risk.
By shorting these stocks, he is effectively betting that investors have priced in too much optimism. In other words, he expects reality to catch up with the hype. His move has unsettled many traders who had grown accustomed to the assumption that AI stocks could only move in one direction: UP.
Palantir’s CEO, Alex Karp, has already pushed back, saying that the company’s growth trajectory will ultimately prove the skeptics wrong. Karp insists that the AI revolution will deliver the productivity and profit to justify current prices. But Burry’s track record makes it hard for markets to ignore his warning.
Even insiders say valuations look overheated
Burry is not alone in his concerns. Former Intel CEO Pat Gelsinger has also described the AI sector as being in bubble territory. He believes that while the technology itself is transformative, the pace of investment far exceeds what the market can sustain in the near term.
Gelsinger predicts that any correction might unfold gradually rather than in a sudden crash. But the implication is the same: AI spending is racing ahead of revenues. With every major tech company now building or renting AI infrastructure, the question becomes whether demand will ever match these extraordinary costs.
Meanwhile, signs of strain are beginning to appear. AI hardware orders have started to fluctuate. Venture funding for smaller AI startups has cooled. And major investors are growing cautious about valuations that seem disconnected from earnings. The market remains uncertain whether this is just a pause or the start of a larger realignment.
The risk of circular money and hype
Another growing concern is the structure of the AI economy itself. Some of the largest deals involve companies investing in each other while buying each other’s hardware and services. These arrangements blur the line between real demand and financial engineering.
If companies are generating revenue primarily from their partners within the same circle of AI investors, then growth may appear stronger than it really is. Such patterns have historically preceded market corrections.
Burry’s critics call this view overly pessimistic, but his supporters say it is precisely this kind of skepticism that kept him ahead of the curve in 2008.
Markets brace for volatility
Whether or not the AI bubble bursts soon, volatility is likely to remain high. Nvidia and Palantir have already seen sharp swings as investors react to shifting sentiment. Traders are weighing Burry’s warning against the ongoing narrative that AI will redefine entire industries.
For now, the market stands divided. Optimists believe artificial intelligence will usher in decades of growth. Skeptics, led by voices like Michael Burry, warn that excessive confidence could turn today’s boom into tomorrow’s bust.
Either way, the AI sector has entered a new phase—one where faith and fundamentals are colliding in real time.
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