Michael Burry's Prediction: Why Tesla Could Join His Growing List of AI Shorts

When Michael Burry predicted the 2008 housing crisis, few believed him. Two decades later, investors are paying closer attention whenever the legendary hedge fund manager makes a market call. His latest prediction centers on artificial intelligence stocks—and Tesla may be next on his targeting radar.

Recent filings reveal that Burry has established short positions against Nvidia and Palantir Technologies, signaling serious concerns about the AI boom. But his most provocative comment came on his newly launched Substack newsletter, where he called Tesla “ridiculously overvalued.” This prediction may be the prelude to another major short position.

The Track Record That Gives Weight to Michael Burry’s Prediction

Michael Burry’s name became synonymous with contrarian investing after the events depicted in Michael Lewis’ The Big Short. The hedge fund manager was one of the few who saw through the financial system’s vulnerabilities before the subprime mortgage crisis unfolded. His ability to spot market bubbles has kept investors and critics alike monitoring his every move for nearly two decades.

Recently, Burry deregistered his hedge fund, Scion Asset Management, and launched a paid newsletter on Substack. This shift matters because registered investment advisors face strict SEC scrutiny over their public statements. By operating independently, Burry gained more freedom to share his unfiltered analysis—and his initial posts reveal a deeply skeptical view of the AI investment landscape.

Michael Burry’s Prediction: Artificial Intelligence Stocks Are in Trouble

Burry’s core concern about the AI sector centers on inflated valuations detached from economic reality. Consider the S&P 500 Shiller CAPE Ratio—a metric that measures whether the broader market is overpriced. The current reading of 40 approaches levels last seen during the dot-com bubble in the late 1990s, before that market crashed spectacularly.

Among AI stocks, Palantir Technologies exemplifies his concerns most vividly. The company trades at a price-to-sales ratio of 113 and carries a price-to-earnings multiple of 403—figures that strain credibility for any business model. These valuations suggest investors are pricing in decades of perfect execution and unrealistic growth rates.

With Nvidia, Burry’s critique goes deeper. He discovered a significant accounting discrepancy: while Nvidia’s GPUs typically become obsolete within 18 to 24 months, the company’s largest customers (major cloud infrastructure providers known as hyperscalers) depreciate this hardware over five to six years. This timing gap could mean tech companies are artificially inflating their earnings by spreading costs over longer timelines than justified.

Why Tesla Figures Into Michael Burry’s Prediction

Tesla exemplifies another category of overvaluation. The electric vehicle manufacturer’s price-to-sales ratio sits at 16—exceptionally high for a capital-intensive auto business. More troubling, Tesla’s P/E multiple keeps expanding even as the company’s revenue growth slows and profitability declines.

The reason for Tesla’s premium valuation is straightforward: investor enthusiasm for speculative technologies. Elon Musk’s robotaxis and Optimus humanoid robot represent potential trillion-dollar markets. However, both projects remain highly experimental. Neither has achieved commercial deployment, nor do they meaningfully contribute to Tesla’s financial results today.

Yet the market prices Tesla as though these breakthroughs already happened. This gap between promise and reality fits precisely into Michael Burry’s prediction framework—the pattern he sees repeating across overvalued AI plays.

Is This Prediction on the Right Track?

By traditional valuation metrics, Burry’s concerns hold merit. Historically, when assets trade at extreme multiples disconnected from current cash flows, corrections eventually follow. The dot-com crash, the housing bubble, and countless other market episodes validate this pattern.

However, critics note that Burry’s Nvidia thesis overlooks an important detail: the constant product refresh cycle drives genuine demand for newer chips, potentially justifying customer confidence in long-term infrastructure investments. Major accounting firms audit these companies, and their financial teams possess deep expertise in proper depreciation methods.

The Tesla prediction may carry more conviction. The company’s core business—selling vehicles—remains under pressure, while the technologies underlying its valuation story remain years away from commercial viability.

What Comes Next?

Michael Burry’s prediction of AI stock weakness and Tesla overvaluation represents a deliberate contrarian stance against prevailing market enthusiasm. Whether this prediction proves prescient or premature will likely become clear within the next few years as AI investments either deliver promised returns or disappoint as speculative excess unwinds.

For investors tracking Michael Burry’s latest moves, one clear signal has emerged: the legendary short-seller believes this moment resembles previous bubbles. History suggests it’s wise to watch what he does next.