Michael Burry, the contrarian made famous by The Big Short, is once again positioning himself against the market’s hottest story. After years of exuberance around artificial intelligence, he now argues that the speculative excess has grown so large that even aggressive policy support will not be able to cushion a collapse. His warning is not just about stretched valuations, but about a business model he believes is being hollowed out by relentless spending on AI infrastructure.
Rather than focus on hype or headline-grabbing demos, Burry is drilling into cash flows, returns on capital, and the concentration of risk in a handful of technology giants. His message is stark: the AI trade has morphed into a systemic vulnerability, and the problem, in his words, is “too big to save.”
Burry’s case: AI is turning Big Tech into a worse business
At the core of Burry’s critique is the idea that artificial intelligence is not, at least for now, the high-margin gold mine investors imagine, but a drag on profitability. He argues that the largest platforms are pouring unprecedented sums into graphics processing units, data centers, and research, while the revenue model for generative AI remains unproven. In a recent analysis, he wrote that AI is turning Big Tech into a worse business over the long run, because the capital intensity required to stay competitive erodes the very economics that once made these companies so dominant, a view he has tied to the performance of Big Tech.
To Burry, the AI boom is not just about software, but about a vast industrial buildout that resembles a capital spending arms race. He has pointed to the surge in demand for GPUs and hyperscale data centers as evidence that companies are prioritizing capacity over discipline, with little clarity on when those investments will translate into sustainable profits. In his view, the market is rewarding scale and narrative rather than measured returns, which is why he sees AI as a force that could ultimately compress margins and destabilize earnings for the very firms investors currently treat as safe havens.
The key metric: ROIC and the “too big to save” warning
Unlike many commentators who focus on revenue growth or user metrics, Burry has zeroed in on return on invested capital as his preferred gauge of the AI cycle. In a Substack post highlighted by Jan and Follow Peter Gelling, he argued that the right way to judge whether the AI surge is sustainable is to track how much profit companies generate for every dollar they pour into chips, servers, and software. He has warned that if ROIC continues to fall even as AI spending accelerates, it will signal that the industry is destroying value rather than creating it, a concern he has linked directly to his ROIC focus.
That framework underpins his bleak assessment of what happens if the AI trade unravels. In a recent warning, Burry said the AI bubble has grown so large that even aggressive government action will not be able to prevent serious damage once it bursts. He has argued that the scale of capital committed to AI, from corporate balance sheets to public markets, means any reversal would ripple through employment, tax revenues, and credit markets in ways that are difficult to contain. In his words, the problem is “too big to save,” a phrase he used while cautioning that not even federal intervention can fully offset the fallout from a severe AI downturn, a view captured in his comments on government intervention.
How his portfolio expresses the AI skepticism
Burry is not content to leave his AI skepticism at the level of theory. Through Scion Asset Management, he has built a portfolio that leans heavily against some of the most visible beneficiaries of the AI boom. An analysis of his Q3 2025 positions showed that Scion Asset Management, led by Michael Burry, made a decisive move that underscored his reputation as a staunch contrarian, with a massive allocation to bearish bets on high-flying technology names, a posture that fits his historical skepticism of market exuberance and is reflected in his Scion portfolio.
One of the clearest expressions of that stance is his use of options to bet against companies at the center of the AI narrative. According to a detailed breakdown of his holdings, hedge fund manager Michael Burry has 66% of his $1.4 billion portfolio in put options on Palantir, and another 14% of his capital tied to similar downside positions, a structure that amounts to a $1 billion warning about the AI boom and what investors should do next, as shown in his concentrated put options. That level of conviction, focused on a company that markets itself as an AI leader in defense and data analytics, signals how aggressively he is willing to challenge the consensus around AI winners.
Targeting Nvidia, Oracle and the GPU arms race
Burry has also singled out specific hardware and software suppliers that he believes are emblematic of the AI bubble. In a critique that drew wide attention, he took aim at Nvidia, arguing that the market is extrapolating current demand for GPUs far into the future without accounting for potential oversupply or competition. He warned of an unpredictable AI bubble burst and said there is no way to time or predict the exact moment when sentiment will turn, a caution he delivered while criticizing Nvidia’s valuation and the broader GPU trade, as captured in the report titled Investor Michael Burry.
His skepticism extends beyond chips to enterprise software. In mid January, a detailed breakdown of his positions showed that Legendary Investor Michael Burry Is Betting Against Oracle Stock, with a focus on what you need to know about the bear case for ORCL and how to trade it, highlighting his view that Oracle’s AI narrative may not justify its share price. The analysis noted that Michael Burry reveals a bearish bet through put options, with the potential payoff tied to a decline in the stock and the price of the put options, underscoring his conviction that some legacy software vendors are leaning too heavily on AI branding to support valuations, a stance laid out in his Oracle bet.
The macro backdrop: charts, critics and what investors should watch
Burry’s AI warnings sit within a broader macro view that the stock market has become dangerously dependent on a narrow group of mega-cap names. He has highlighted a chart showing the growing dominance of a handful of technology giants in major indices, arguing that this concentration leaves the market vulnerable if those leaders stumble. In one widely discussed analysis, Michael Burry warned that a shift in market structure had left investors less able to tolerate a deep bear market, pointing to the risk that a downturn in AI-linked stocks could drag the entire market lower, a concern illustrated by the chart that has him worried.
Not everyone agrees with his assessment. One detailed critique argued that Burry’s AI bet misses the point, suggesting that while his concerns about capital intensity are valid, he may be underestimating the long-term productivity gains and new revenue streams AI could unlock. That analysis noted that Burry’s argument focused heavily on near-term spending at several major technology companies, while supporters of the AI thesis believe those investments will pay off over a longer horizon, a counterpoint laid out in the discussion of why Burry’s argument may be incomplete.
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