The Case Against AI Giants: Michael Burry's Billion-Dollar Wager on Market Correction

Legendary contrarian Michael Burry, famous for profiting from the 2008 housing crisis, is now wagering billions that the artificial intelligence sector faces an imminent collapse. His latest move signals a conviction that Nvidia and Palantir Technologies—two companies that have collectively driven major stock indices to unprecedented levels—are significantly overvalued.

Timing the Untimable

The hedge fund strategist’s track record reveals a persistent pattern: being early. During the dot-com era, Burry identified structural flaws before the market imploded, yet his timing left investors questioning his methodology. The housing market vindication came, but only after considerable skepticism.

Today, Burry argues the comparison is striking. “This bubble mirrors the dot-com cycle,” he explained during a recent podcast appearance with Michael Lewis. “Though that wasn’t truly a technology bubble—it was fundamentally about data-transmission infrastructure collapsing under unrealistic expectations.”

The artificial intelligence sector, according to Burry’s analysis, exhibits identical symptoms: companies investing heavily in each other’s ventures, data center capacity constraints reaching critical levels, and valuations completely untethered from underlying economics.

Capital Deployment and Conviction

After quietly closing his hedge fund last month, Burry launched a subscription newsletter outlining his thesis. “Cassandra Unchained” attracted 171,000 subscribers within weeks, with annual fees set at $379—positioning himself to directly communicate with believers in his analysis.

His put options bet roughly $10 million across both companies, with potential payouts exceeding $1 billion if both stocks experience significant declines by 2027. For Palantir, Burry targets a drop from current levels (near $200) down to approximately $50 per share. Nvidia would need to fall roughly 37% to around $110 to trigger his profit scenario.

The Specific Concerns

For Palantir: Excessive executive compensation, over-reliance on government contracts, and intensifying competition—particularly from International Business Machines—represent structural weaknesses masked by market enthusiasm.

For Nvidia: Burry highlights troubling patterns among major customers like Oracle and Meta Platforms. The chip manufacturer’s financing arrangements for customer purchases resemble the accounting mechanics that characterized Enron’s vendor relationships. Additionally, Burry questions how these companies depreciate chip assets, suggesting inflated earnings presentations distort actual profitability.

Market Response and Dismissal

Palantir’s CEO Alex Karp dismissed Burry’s concerns on financial television, while Nvidia issued a formal rebuttal defending its accounting transparency and business fundamentals. The stocks experienced volatility following Burry’s public position on November 3, though neither has experienced the sustained decline his thesis predicts.

Among retail investors and social media observers, skepticism runs deep. Commentators note Burry’s numerous failed recession predictions over the past 15 years. His January 2023 “SELL” call preceded Silicon Valley Bank’s collapse, yet the S&P 500 subsequently climbed approximately 70%—an outcome Burry has publicly acknowledged as a miscalculation.

The Paradox of Awareness

Intriguingly, Burry’s visibility may have created an unexpected market dynamic. As Michael Green, chief strategist at Simplify Asset Management, observes: “Increased awareness of these concerns may have actually strengthened investor conviction in tech stocks, rather than triggering defensive repositioning.”

The fundamental question remains unresolved: whether Michael Burry has identified legitimate systemic risk in the artificial intelligence infrastructure buildout, or whether his contrarian positioning simply arrives prematurely once again.