Kush V Langdol
November 18, 2025 19:23
Michael Burry has invested $1.1 billion in AI stocks, warning of a market bubble inflated by hype and accounting tricks and urging tech investors to be cautious.
Michael Burry, the legendary investor known for his prescient investments in the 2008 subprime mortgage crisis, has taken on one of the hottest areas of the stock market these days: artificial intelligence (AI). With the value of AI stocks surging to unprecedented levels in 2025, Burry took a massive short position, signaling serious concerns about an AI market bubble caused by hype, questionable accounting, and unsustainable business economics. In this article, we explore the details and implications of Burry’s bearish stance on AI, with a focus on blockchain and technology investors.
Context: AI’s meteoric rise and investor enthusiasm
AI has become a defining technology trend over the past decade, driving advancements from self-driving cars to generative AI creativity tools. This surge has led to massive capital flows into AI-related stocks, particularly so-called “AI hyperscalers” such as Nvidia, Palantir, Meta, and Oracle. These companies have seen their stock prices soar on expectations of AI-driven profits and dominance, making AI a central part of many portfolios.
However, such rapid valuations come with the risk of speculative excess. Observers have warned that, similar to previous tech bubbles such as the dot-com craze of the late 1990s, AI’s current valuation may not be supported by realistic revenue or profit trajectories. Now Michael Burry has joined the conversation with a sharp warning.
Michael Burry’s anti-AI bet
Burry has placed about $1.1 billion worth of put option bets on key AI-related stocks, including Nvidia and Palantir. A put option gives him the right to sell these stocks at a set price and profit if the stock price falls. His large stake is a clear sign of his confidence that an AI crash is possible, if not imminent.
His criticism focuses on the financial reporting of AI “hyperscalers,” especially depreciation accounting. Burry argues that companies such as Meta and Oracle have extended depreciation periods for their expensive professional AI computer equipment. This allows these companies to reduce annual depreciation expenses, artificially inflate reported profits, and conceal the true costs of their AI investments. Burry estimates that this accounting treatment could overstate revenues by about $176 billion between 2023 and 2028, misleading investors about the profitability of the sector.
Why This Matters for Blockchain and Technology Investors
AI and blockchain solve different technological challenges, but the lessons learned from Burry’s short position are broadly beneficial for technology investors. Both sectors have experienced significant cycles of hype due to promises of revolutionary change. However, when it comes to investing, there is a critical difference between potential and realized economic value.
- Valuation Discipline: Burry’s warning highlights the need for rigorous valuation and skepticism about inflated earnings reports. Even in the blockchain space, many projects and companies have soared based on speculative narratives rather than verifiable cash flows or sustainable business models.
- Accounting Transparency: Investors should closely scrutinize how companies and projects account for capital expenditures, including specialized hardware. Nontransparent or aggressive accounting can distort the true health of a venture.
- Bubble Risk: Keeping in mind bubbles in technology, whether AI or blockchain, diversification and risk management remain essential. No technology, no matter how innovative, is immune to market cycles.
What factors could trigger an AI market downturn?
Burry’s short position reflects his view that stocks could fall sharply if the AI sector fails to meet lofty earnings expectations or if earnings overstatements are corrected. Other possible triggers include:
- Technical or regulatory hurdles are slowing the adoption of AI applications.
- Increased competition reduces pricing power and margins.
- Rising interest rates increase the cost of capital and make speculative technology stocks less attractive.
- Broad market corrections disproportionately affect high-growth sectors.
conclusion
Michael Burry’s decision to sell the AI market is an important signal that caution is needed as the economy heats up. The transformative potential of AI is undeniable, but investors should be wary of accounting gimmicks and inflated valuations. For blockchain and technology investors, Burry’s bet is a reminder that innovation should be approached with rigor and skepticism, combining passion with financial discipline.
Ultimately, there have always been winners and losers in technology cycles. The challenge is to identify sustainability on the speculative side before the market corrects. Burry’s shortcomings in AI may turn out to be a timely warning about what could be the defining investment story of this decade.
Source: CNBC: ‘Big Short’ investor Michael Burry criticized AI hyperscalers for artificially increasing profits.BBC: Tech Stocks Fall Inspires Trader to Bet on The Big Short on AIBusiness Insider: Why ‘The Big Short’ Michael Burry is betting on NVIDIA, Palantir, and AISaxo Bank: The Big Short: Was Michael Burry Right About AI Trading?luck: The ‘Big Short’ investor who bet $1 billion on the AI bubble says this.
Image source: Shutterstock