Michael Burry, the hedge fund manager immortalized in The Big Short for betting against the subprime mortgage market, is once again sounding alarms. This time, his focus is on the AI-driven stock market boom, which he suggests may be inflating into a bubble.
On social media platform X, Burry quoted a line from the 1983 film WarGames: "Sometimes we see bubbles. Sometimes we can make a difference. Sometimes, the only way to win is not to participate." The cryptic post hints at a more defensive stance, even as Wall Street remains captivated by the AI narrative.
Tech Earnings Highlight Market Sensitivity
The warning comes during a volatile earnings week for Big Tech. Meta and Microsoft both reported results that fell short of expectations, dragging markets lower on Thursday. A rebound followed Friday after Amazon and Apple delivered stronger numbers. The whiplash underscores how sensitive markets have become to any shift in the AI investment story—even minor disappointments can trigger outsized moves.
Burry’s Trading Record
While Burry is best known for shorting the housing market ahead of the 2008 financial crisis, filings show he has mostly held long positions over the past year.
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In Q1, he bought put options against Chinese tech names like Alibaba, Baidu, and JD.com, while also betting against Nvidia.
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By Q2, after Nvidia’s stock doubled, Burry closed those shorts and pivoted into bullish positions in tech and healthcare.
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Investors now await his next 13F filing, due in about two weeks, to see if his latest comments translate into a more defensive portfolio.
AI Spending and Financing Risks
Burry’s caution also comes as Big Tech ramps up capital expenditures in unconventional ways. Traditionally, AI investments were funded with cash. But Meta recently raised $27.3 billion to build its Hyperion data center in Louisiana, using a special purpose vehicle (SPV) structure that kept liabilities off its balance sheet.
While the move preserves Meta’s credit rating, analysts warn that if SPVs become the norm for AI financing, it could obscure leverage and increase systemic risk. Reports suggest Meta is preparing to raise another $25 billion in bonds, with filings already submitted to the SEC.
A Familiar Warning
Burry’s latest remarks echo his reputation as a contrarian. His poetic nod to WarGames frames today’s market as a high-stakes standoff: investors are piling into AI-related trades, but risks—from opaque financing to stretched valuations—are building beneath the surface.
Whether his warning proves prescient remains to be seen. For now, markets continue to ride the AI wave, but Burry’s message is clear: sometimes the smartest move is to step aside.