Anticipating the collapse of the AI bubble might be a futile exercise, according to Michael Burry, the investor famed for his “Big Short” success. In a recent Substack post, Burry asserted that predicting the exact moment of a bubble burst is challenging, particularly when it appears there may still be room for growth.
Burry, known for his astute market predictions, offered insights into the nature of shorting stocks. He stated, “Shorts are almost always short-term trades. Usually less than a year, maybe a couple years at most. Not 5 years, not 10 years.” He suggested that the current stock market might be on the brink of a significant uptick, which could quickly transform into a generational high.
Addressing queries from readers in his blog post, Burry highlighted the issue of “supply-side gluttony” in the AI sector. He noted the extensive data-center expansions, massive GPU orders, and billion-dollar investments that lack real end-user demand, misinterpreted by some investors as supply-chain activity. He attributed much of this hype to Nvidia CEO Jensen Huang’s marketing strategies.
Burry cautioned, “Even when it finally tops, it will not be for any specific reason. Even if the reason is an AI buildout bubble popping, that will likely not be apparent until a year or two later.” He advised caution, stating, “Mostly, it is prudent neither to short stocks nor to buy puts on stocks. Stocks that are obviously overvalued tend to have the most upward momentum yet have puts that are very expensive.”
Despite Burry’s critique, Nvidia has not commented on his observations. In response to earlier remarks, Nvidia released a note to Wall Street, countering some of Burry’s claims. Nvidia’s CEO, during a Q3 earnings call, addressed concerns about an AI bubble, saying, “From our vantage point, we see something very different. We excel at every phase of AI, from pre-training and post-training to inference.”
Burry launched his paywalled Substack, Cassandra Unchained, in November, where he initially targeted Nvidia. He likened the company to Cisco during the dot-com bubble, a comparison referencing Cisco’s dramatic stock decline of over 75% during that period. He also showcased charts on X illustrating investment deals between Nvidia and other tech firms.
As the debate over the AI bubble continues, Burry’s insights provide a cautious perspective on investing in this rapidly evolving sector.
