The AI Reckoning: Why Michael Burry Sees a Crash Ahead

The legendary contrarian investor who famously wagered against the housing market before its 2008 collapse is now positioning himself for another major market collapse—this time targeting the artificial intelligence sector. Michael Burry has placed significant bets that technology giants Nvidia and Palantir Technologies will experience sharp declines, despite their combined market capitalization exceeding $5 trillion and their central role in driving stock indices to record levels in 2024.

The AI Bubble Thesis

After remaining largely absent from public discourse over the past decade, Burry recently re-emerged with renewed conviction about market inefficiencies. His argument centers on a familiar narrative: the current AI investment phenomenon mirrors the dot-com bubble of the early 2000s, though with different underlying mechanics.

According to Burry, the issue isn’t artificial intelligence itself, but rather the market’s disconnection from fundamental economic reality. Companies have inflated valuations based on speculative AI potential rather than sustainable business models. He draws parallels to how the earlier dot-com era wasn’t fundamentally about internet technology, but rather about unsustainable investment in data transmission infrastructure.

From Hedge Fund to Substack Newsletter

Burry’s return to prominence coincided with significant professional changes. He recently shuttered his hedge fund and launched a paid newsletter called “Cassandra Unchained” on Substack, where he articulates his investment theses for a growing subscriber base. The newsletter achieved rapid traction, attracting approximately 171,000 subscribers willing to pay $379 annually—a relatively modest fee compared to premium investment newsletters that command over $1,000 per year.

His public positioning strategy has reignited interest among retail investors and professional analysts alike, with dedicated online communities parsing his statements for market insights.

The Specific Wagers

Burry’s actual financial commitments against these companies remain modest in absolute terms—approximately $10 million in put options—but carry substantial leverage. These positions could potentially multiply into over $1 billion in gains if the predicted declines materialize.

For Palantir Technologies, Burry projects the stock must fall to approximately $50 by 2027 from current trading levels near $200. His rationale encompasses several concerns: the company’s heavy reliance on government contracts, generous executive compensation packages, and intensifying competitive pressures from established technology firms including International Business Machines.

Nvidia’s case involves different but interconnected concerns. Burry alleges that the chip manufacturer has been essentially financing purchases by major customers such as Oracle and Meta Platforms—a practice he characterizes as economically unsustainable and reminiscent of how Enron artificially propped up vendor purchases. His analysis suggests that chip longevity accounting practices may artificially inflate reported earnings across the industry, and if the speculative bubble deflates, a cascade of downward revisions could damage future revenue expectations for the entire sector.

Burry’s Nvidia position breaks even if the stock declines approximately 37% to $110 per share by 2027, from current levels around $190.

The Track Record Problem

Skepticism about Burry’s current warnings stems partly from his uneven forecasting history. Over the past 15 years, he has made numerous market crash predictions, many of which failed to materialize within expected timeframes. A particularly notable example involved a January 2023 post urging followers to liquidate positions; Silicon Valley Bank subsequently collapsed two months later, yet the S&P 500 index appreciated roughly 70% in the intervening period—a prediction reversal Burry himself has acknowledged.

Market critics frequently invoke this pattern, with social media commentators joking that Burry has “predicted 20 of the last 2 recessions.” This history complicates his current credibility despite the conceptual merit of his analytical framework.

Corporate Responses and Market Dynamics

Both Nvidia and Palantir have forcefully contested Burry’s assertions. Palantir’s Chief Executive Alex Karp dismissed Burry’s characterization through media appearances, while Nvidia released a formal statement asserting that “Nvidia does not resemble historical accounting frauds because Nvidia’s underlying business is economically sound, our reporting is complete and transparent, and we care about our reputation for integrity.”

Since Burry’s public positioning in early November, both stocks have experienced price fluctuations, though without the directional clarity his thesis would require. Interestingly, some market observers suggest that heightened awareness of Burry’s short positions may have paradoxically reinforced bullish sentiment among certain investors, who interpret any challenge to AI leadership stocks as confirmation that valuations can sustain indefinite appreciation.

The Timing Dilemma

Even proponents of Burry’s analytical approach acknowledge his historical vulnerability to timing miscalculations. As industry observers have noted, his most successful call—the housing market decline—benefited from years of positioning before the actual catalyst materialized. The fundamental challenge remains that identifying a bubble’s existence differs markedly from predicting when it will rupture.