Why Michael Burry thinks the AI bubble will unravel
“The Big Short” investor Michael Burry said the artificial intelligence market bubble could unwind within about the next two years, following the pattern of the dotcom mania where share prices peaked well before spending on the underlying technology tops out. “What you see in every prior one was the relevant stock market peak was before you were even halfway done with the capital expenditure,” Burry told host Michael Lewis on his podcast “Against The Rules: The Big Short Companion.” “In the majority of cases, the capital expenditure hadn’t even peaked yet,” he added. Burry’s rare interview with Lewis, who authored “The Big Short” book about the investor’s famous call on the housing market crash, come amid his recent focus on what he sees as a bubble forming around the AI trade. He said during the podcast that Palantir and other companies are doing “consulting” around AI rather than working directly on the technology, which can make their high valuations hard to justify. Burry — who recently deregistered his hedge fund and launched a Substack blog — said investors should consider selling holdings that have shot up during this run. He also warned that a slide in today’s market would look different than during the dotcom bubble and lead to a more drawn-out decline, given that more regular investors today are passively invested in index funds and ETFs which are concentrated in AI names. “I think the whole thing’s just gonna come down,” he said. “It will be very hard to be in a long (on) stocks in the United States and protect yourself.” Specifically, Burry said Palantir should fall drastically from its current levels. The defense technology stock has surged nearly 130% in 2025 and has skyrocketed more than 2,100% over the last three years. Burry said he would instead pick up health care stocks in the current market. The S & P 500 ‘s health care sector has added about 11% over the last three years, while the broader index has jumped just over 68% over the same time period. “They’re really out of favor,” Burry said of the sector. Burry also chided Bitcoin , arguing that it holds no material value and has given way to a rise in illegal behaviors. The digital currency rose above the $92,500 level on Wednesday following a recent bout of volatility. “It’s a tulip bulb of our time,” Burry said. But, “it’s worse than a tulip bulb because this has enabled so much criminal activity.”
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