Michael Burry Takes Aim at Artificial Intelligence Stocks Amid Bubble Fears

Michael Burry, the investor renowned for his successful wager against the United States housing bubble as depicted in The Big Short, has shifted his sights to artificial intelligence equities. Burry, who recently returned to public discourse, suggested that markets are once again exhibiting bubble-like behaviour. His latest moves have seen him establish significant positions against two of the largest firms driving the current artificial intelligence investment boom.

Earlier this month, Burry executed major bets against Nvidia and Palantir, reflecting his belief that these names epitomise the exuberance gripping markets. Nvidia recently became the world’s first company valued at five trillion dollars, whilst Palantir shares have climbed nearly 200 percent over the past year. Burry’s actions have not gone unnoticed. Palantir’s chief executive, Alex Karp, dismissed Burry’s wager against his company as illogical, but following the announcement of a put contract targeting Palantir, the firm’s shares fell by 15 percent over three days, a significant decline in a short period.

The reaction from market participants has been mixed. Many remember Burry’s prescient call in 2008, yet some highlight his previous errors. In 2020, he labelled Tesla shares highly overvalued, only for them to nearly double after his prediction. Similarly, his warnings of a looming stock market crash in early 2021 did not materialise as the S&P 500 ended that year up nearly 27 percent. Burry’s call to sell equities in January 2023 was soon followed by an admission of error as markets continued to rally.

Beyond equities, Burry has also criticised cryptocurrencies, describing Bitcoin as riskier than beneficial. When Bitcoin hovered near 49,500 dollars in early 2021, he called it a bubble; despite his scepticism, the digital currency soared to an all-time high above 68,000 dollars later that year and currently trades just below 100,000 dollars.

Burry’s conviction appears undented by past missteps. He asserts some artificial intelligence firms are using questionable accounting, specifically accusing Meta and Oracle of extending the useful life of assets to inflate reported earnings. He projects this practice could overstate earnings at Oracle by nearly 27 percent and at Meta by more than 20 percent by 2028. These claims have further fuelled debate about the sustainability of the artificial intelligence sector’s rapid rise.

There is speculation that Burry’s actions may provoke a broader re-evaluation of risk appetite within markets. Some believe he is positioning himself for a reversal in market sentiment, hoping to trigger a momentum shift that favours his outlook. Nvidia shares have already retreated six percent from their recent peak; news of major technology investor SoftBank’s complete exit, selling its full stake in Nvidia, has contributed to the narrative of growing caution.

Burry has intimated he will release more analysis and details in late November, suggesting deeper concerns regarding earnings practices in the technology sector. Should he prove correct, his disclosures may intensify scrutiny of artificial intelligence investments and broader market valuations in the months ahead.