Michael Burry indicates the artificial intelligence bubble could collapse earlier than previously anticipated. The investor renowned for “The Big Short” revealed in a Monday Substack post that he is “moving timelines up,” primarily because he anticipates “the bubble in AI may burst sooner than later.” Burry stated he is “more confident than ever before” that his bearish thesis will “play out over the next year,” revising his earlier “base case” of 2028.
The accelerated timeline prompted Burry to seek “more leverage in my short positions,” leading him to cover his direct short positions and replace them with bearish put options, he explained. These contracts grant the right, but not the obligation, to sell a stock at a predetermined strike price before a specified expiration date. Should the stock decline below that price prior to expiry, he can exercise the puts to sell at a premium to the market price or simply sell the puts for a profit.
Burry disclosed he swapped his outright shorts for puts on Nvidia, Palantir, Micron, Nebius, Oracle, Caterpillar, the iShares Semiconductor ETF, and the Nasdaq 100, all expiring between June and December of next year. He also closed his CoreWeave short with intentions to purchase puts once attractively priced, and acquired fresh puts on MetLife, he noted.
Burry provided key details for each position. For instance, he purchased Nvidia puts expiring next September with strike prices in the mid-$100s, less than half the AI chipmaker’s $229 share price at Monday’s close. Additionally, his Nasdaq 100 puts carry strikes in the $24,000s and expire next September, indicating he expects the tech-heavy index to plummet nearly 20% within the next year from its current level around $30,300.
Burry argued AI companies are borrowing and spending an unsustainable sum to construct data centers powering the technology, positioning themselves for disaster. “If the spending stops or slows, it all comes apart,” he wrote, adding the capital deployed is “increasingly debt, with strings attached.” He noted rising interest rates could exacerbate pressure on AI firms, given private equity, private credit, and their insurers finance much of the infrastructure buildout. “Higher rates stress every part of that chain,” he said.
Burry sees trouble brewing across major hyperscalers. “There are signs of strain at each of the big hyperscalers,” he said in another recent post, adding AI giants’ public comments and filings “provide clues as to how stressed each one really is.” “I think there are many ways these companies are starting to fray,” he wrote.
Burry, who transitioned from managing a hedge fund to writing about personal investments on Substack last fall, gained fame after his massive contrarian bet against the mid-2000s US housing bubble was chronicled in the book and film “The Big Short.” He has repeatedly warned the immense hype surrounding AI, which has driven the stock market to record highs this year, will not endure. Burry has asserted AI giants are masking slowing growth, overinvesting in chips and data centers, employing accounting maneuvers to inflate near-term earnings, harming shareholders through excessive stock-based compensation, and engaging in circular financing deals to sustain hype and prolong the rally. Yet equities have continued to dismiss not only concerns about excessive AI optimism but also other headwinds including foreign conflicts, rising interest rates, soaring bond yields, and resurgent inflation threats.