Renowned investor Michael Burry, famous for profiting from the 2008 housing crash, now says the AI frenzy is a bubble ready to pop.
Who is Michael Burry?
Burry is a former neurologist who turned hedge‑fund manager and made a fortune by betting against the U.S. housing market. He keeps a low public profile but has a large online following that watches his bold market calls.
Why Burry sees a bubble in AI stocks
According to Burry, the rally in AI‑related companies like Nvidia and Palantir has become detached from reality. He compares the situation to the dot‑com boom of the late 1990s, where hype drove valuations far beyond fundamentals.
- AI firms are heavily investing in each other, creating a feedback loop that inflates prices.
- Data‑center capacity and actual demand for AI chips may not keep up with the hype.
- Some companies rely heavily on government contracts or have accounting practices Burry finds questionable.
Details of the short bets
In early November, Burry disclosed put‑option positions worth about $10 million on two AI leaders:
- Nvidia – a chip maker now the world’s most valuable company. Burry’s bet would pay off if Nvidia falls roughly 37% to around $110 per share by 2027 (it trades near $190 today).
- Palantir – an AI software firm valued at about $200 per share. Burry’s position gains if the price drops to $50 by 2027.
If either stock slides sharply, Burry could earn more than $1 billion from these relatively small positions.
Market reaction so far
Since Burry’s announcement, both stocks have shown some volatility, but the decline has been uneven. Many investors remain confident, believing the AI boom will continue.
What investors should consider
- Assess whether AI company valuations are supported by real revenue growth.
- Watch for signs of over‑reliance on a few large customers (e.g., Oracle, Meta for Nvidia).
- Understand that short positions can be risky; a rebound could quickly wipe out gains.
Bottom line
Burry’s warning adds a skeptical voice to the AI hype. While his track record includes both hits and misses, his caution suggests investors should scrutinize the fundamentals behind soaring AI stock prices.
Remember, this is my perspective, not a prediction. Do your own research before making any investment decisions.