In the world of investing, bubbles are both an opportunity and a risk. Michael Burry, the renowned investor recognized for predicting the 2008 housing market collapse and portrayed by Christian Bale in “The Big Short,” has a new forecast—this time concerning artificial intelligence (AI).
Burry’s hedge fund, Scion Asset Management, recently revealed significant put options on Nvidia and an even larger one on Palantir, according to regulatory filings from September 30. This news was released on Monday.
Nvidia and Palantir have garnered considerable attention in the AI sector, with Nvidia becoming the only company globally valued at over $5 trillion. This year, Palantir’s stock has surged by 150%.
In response to Burry’s predictions, Palantir CEO Alex Karp expressed his discontent, stating, “I do think this behavior is egregious and I’m going to be dancing around when it’s proven wrong,” during an interview with CNBC.
Just days before disclosing his positions, Burry shared a cryptic post on X, featuring an image of Christian Bale as himself, with the text: “Sometimes, we see bubbles. Sometimes, there is something to do about it. Sometimes, the only winning move is not to play.”
On Monday, he followed up with four more contextless images. One depicted a concerning downward trend in year-over-year growth in the cloud computing sectors of industry giants like Amazon, Alphabet, and Microsoft from 2023 to 2025, compared to 2018 to 2022.
Another intriguing chart highlighted that “U.S. tech capex growth is matching the tech bubble of 1999-2000.” Experts have noted striking similarities between today’s AI enthusiasm and the dot-com bubble of the late 1990s, which crashed in 2000, wiping out around €5 trillion in market value. Nowadays, nearly every tech company references AI, reminiscent of the way early 2000 companies touted “.com” to attract investors. This trend raises concerns that the current stock prices may disconnect from actual earnings.
Earlier this year, influential economist Torsten Slok from Apollo Global Management alarmingly pointed out that the top 10 companies in the S&P 500 are more overvalued than they were during the dot-com mania.
Additionally, the Bank of England has recently cautioned that current stock market valuations echo the euphoric peak of the dot-com period.
Burry’s X post also included a Bloomberg diagram illustrating circular deal-making among leading AI firms, with Nvidia at the center. These concerns regarding circular investments highlight the growing complex web of multi-billion-euro partnerships among leading technology companies, which can create a stable market if managed well.
However, if any part of this intricate system falters—where breakthroughs slow down or anticipated demand does not materialize—it could initiate a domino effect that jeopardizes the entire economy.
Finally, one of Burry’s posts featured a notable excerpt from the book “Capital Account.” He highlighted two passages related to the telecommunications crash that followed the bust of the dot-com bubble: “By 2002, it was commonly reported that less than 5 percent of US telecoms capacity was in use. Thousands of miles of expensive fibre optic networks remained ‘unlit’ beneath the ground,” and “Wholesale telecoms prices fell by more than 70 percent a year in 2001 and 2002.” This serves as a clear reminder of how rapidly fortunes can shift in the tech sector.
It’s clear that Burry intends to draw parallels between today’s AI-driven market and the volatile landscape of the early 2000s. While investors then weren’t completely mistaken about the internet’s potential—largely transforming society—the overzealous optimism led to unrealistic expectations for growth and profits.
Researchers from the Federal Reserve recently echoed similar concerns, cautioning against building expensive infrastructures too swiftly without corresponding demand. They suggested that if demand fails to meet projections, it could result in “disastrous consequences,” similar to the economic downturn caused by over-expansion in the 1800s.
What should investors know about the future of AI stocks? With the AI hype intensifying, monitoring Burry’s insights could be a wiser choice than ever. As you dive deeper into this topic, let’s explore how to navigate these turbulent waters of investment and stay ahead.
What does the AI bubble mean for investors today? The surge in AI investments has led to public speculation about whether we are in a bubble similar to the dot-com era.
This speculation is fueled by overconfidence in AI stock valuations and the growing number of companies that are touting their AI capabilities despite little underlying business transformation. Understanding when to pull back versus when to invest is crucial.
How can investors manage risks associated with AI stocks? Maintaining a diversified portfolio and regularly evaluating the underlying technology and market need can help. It’s vital for investors to keep a discerning eye on potential red flags.
Is it too late to invest in AI companies? While AI stocks have surged, the potential for continued growth remains. However, investors should be cautious and do thorough research before jumping in.
What steps should I take if I believe in the potential of AI? Start with understanding the technology, market dynamics, and various companies within the AI space. Knowledge is your best tool in the fast-evolving landscape.
How does the current AI landscape compare to the dot-com bubble? Today’s AI market exhibits striking similarities to the dot-com era, especially regarding inflated stock valuations promising rapid growth that may not be realistic.
As the discussion around AI stocks continues to evolve, keep your mind sharp and stay informed. For more insights and resources on investment strategies, explore content at Moyens I/O.