Michael Burry Warns AI Bubble Echoes Dot-Com Era Risks

 WallSt.Watchdog
 
  WallSt.Watchdog
 
Follow  Message
 
 
 
More than just a barking dog. We dig deep, sniff out scams, and expose market manipulations. Join us to become a savvier investor, armed with truth and insight. Remember, Wall Street might sleep, but the Watchdog never does.
 

•  28 Dec 2025
 

•   NVDA  
   
  -2.99%
•   PLTR  
   
  -5.95%

Michael Burry is back in the conversation, and once again he is standing against the crowd. For traders and investors who remember 2008, his name still carries weight. Not because he is always right, but because he is often early, uncomfortable, and willing to sit alone with a view that challenges market confidence. This time, his focus is the AI boom, a trade many see as unstoppable. Burry sees something else.

Burry core argument is not that artificial intelligence is fake or useless. He is clear about that. The concern is valuation, funding, and pace. In his words, this phase of AI reminds him less of a bubble in websites and more of the late-1990s overbuild in infrastructure. Back then, the promise of the internet was real, but capital rushed in faster than sustainable demand. Fiber, data centers, and hardware were built far ahead of actual usage. When growth slowed, prices collapsed. The technology survived. Investors did not always.

Today, the infrastructure looks different, but the pattern feels familiar to him. Massive spending on chips, servers, and AI platforms assumes demand that may take longer to materialize than markets currently expect. For traders holding long exposure, this distinction matters. A good long-term story does not protect against short-term drawdowns when expectations reset.

Burry most visible expression of this view is through put options against $NVDA and $PLTR. Together, these companies represent a large share of AI optimism in public markets. The notional size of the position is modest relative to their combined market value, but the leverage is significant. A sharp decline would turn a small premium into an outsized payoff. That asymmetry is classic Burry. He is not betting on a slow grind. He is betting on a moment when confidence cracks.

With $PLTR, his critique is structural. He points to heavy reliance on government contracts, where pricing pressure is constant and growth is tied to budgets rather than open-ended demand. He also highlights rising competition from established players like IBM and questions whether shareholder value is diluted by generous executive compensation. From his perspective, the stock price assumes a commercial expansion that has not yet proven durable. Palantir management has dismissed these claims forcefully, arguing that demand is strong and long-term, but the disagreement itself highlights how stretched expectations have become.

The case against $NVDA is more nuanced. Burry does not deny current demand for chips. Instead, he focuses on how that demand is financed and accounted for. He raises concerns about vendor financing and close financial ties between suppliers and customers, patterns that have historically amplified cycles rather than smoothed them. He also questions assumptions about chip lifespan. Longer depreciation schedules make near-term profits look stronger. If real-world usage shortens those lifecycles, earnings could face sudden pressure. Nvidia has rejected these claims and insists its reporting reflects genuine economic activity. For now, the market believes them.

Skeptics of Burry view have a valid point. Timing has always been his weakness. Over the past decade, he has warned repeatedly about market excess, and many of those warnings came far too early. In early 2023, he publicly advised investors to sell, only to watch markets move higher. He later acknowledged the mistake. For active traders, this history matters. Being early can be indistinguishable from being wrong, especially when momentum dominates.

That is why this moment is uncomfortable rather than decisive. The AI trade continues to work. Pullbacks have been shallow, and dip buyers remain aggressive. To many bulls, the presence of loud skeptics is not a warning sign but reassurance that the market has not reached full euphoria. When everyone agrees, risk is highest. Right now, disagreement still exists.

It is also worth noting that Burry is no longer running a traditional hedge fund. He has closed his fund and shifted toward focused positions and a paid newsletter. That changes how his views should be interpreted. He is influencing debate more than capital flows. Markets have noticed his positions, but they have not re-priced around them.

For traders and investors, the practical takeaway is not to blindly follow or dismiss him. The real signal lies in what he is questioning. Are revenue projections tied to proven demand or optimistic budgets? Are margins sustainable if competition intensifies? How sensitive are these companies to changes in financing conditions or accounting assumptions? These are not bearish questions. They are risk questions.

AI may well reshape industries over the next decade. That does not guarantee smooth returns along the way. History shows that transformative technologies often deliver their biggest benefits after painful valuation resets. Whether that reset comes next year or much later is unknowable.

Burry warning is not a call to panic. It is a reminder to separate belief in technology from discipline in price. If you are long $NVDA $PLTR or the broader AI trade, understanding the downside case does not weaken your position. It strengthens it. And if you want to go deeper, this is one of those moments where revisiting assumptions may matter more than chasing the next headline.

View All Headlines