The man who foresaw the 2008 housing crash and became famous as an investor Michael Burry is now betting big on the disillusionment of the AI Craze. His hedge fund Scion Asset Management disclosed in late 2025 that it had short positions in more than 1.1 billion dollars of major AI stocks such as Nvidia and Palantir. This implies that Burry is betting that these stocks would plummet in the near future. His action has triggered sell-offs by AI stocks to insane heights, and has sounded red flags to ordinary investors.
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Burry regards the AI boom as a huge bubble, similar to the dot-com bubble that exploded in 2000. He notes that hyperscalers, or big tech giants, such as Amazon and Meta, are paying billions to Nvidia regarding AI hardware. Yet they are bending the truth on the longevity of these chips.
They inflate their profits by depreciating their gear using low depreciation rates which state that the gear will last five or more years. Burry cautions that this may cover up to 176 billion concealed expenses by 2028 and earnings will plummet once the genie is out of the bottle. He refers to it as blessed fraud, in which hype conceals poor economics.
https://www.barrons.com/articles/nvidia-stock-ai-accounting-allegations-366f16ac
Another major concern is the spending spurt. Capex-to-GDP ratios are screaming overkill and AI companies are pouring money into data centers and chips at rates that can only be compared with previous bubbles. The charts created by Burry indicate that stocks hit their maximum point right at the middle of these booms and then fall at a very high rate after one or two years when the money is dried up. Nvidia reached a delirious valuation of 5 trillion, and Palantir went as high as 500 billion – far higher than any worthwhile company, such as Exxon or Netflix. However, as AI has not made much actual money yet and cheaper competitors such as Broadcom are emerging, Burry believes the crash is near. Nvidia is further stung by export bans to China which is the second-largest AI market.
The thesis presented by Burry is straightforward AI stocks are over-rated and unrealistic. He employs the put options to take advantage of the decline and his warnings already erased billions of market values. Even the CEO of Palantir said it was insane, but Burry believes in the figures, not the hype.
To ordinary people, it is a clear indication that they should avoid AI stocks. They are outrageously priced, ranging between 30 and 57 times sales or earnings, when the growth may not be sustained. A single misstatement of earnings or an increase in the rate of your Federal Reserve and you might lose half your cash during the night. In November 2025, Burry ended his fund, stating that he was through with the irrational exuberance. Good idea – can we afford it on a trend? Spend your money, this train will go wrecking.
