'Big Short' Michael Burry says the bulletproof AI narrative reminds him of the dot-com and housing bubbles
Michael Burry of "The Big Short" fame said the relentless positivity around AI reminds him of the market mood before the dot-com and housing crashes.
Big Short investor Michael Burry warns that the prevailing positive sentiment around artificial intelligence reminds him of the dot-com and housing bubbles, suggesting the AI boom could lead to far more devastating consequences than the Enron collapse. Burry recalled the same kind of unshakable optimism that preceded the dot-com crash and the 2008 financial crisis.
He expressed concern that AI startups are valuing themselves at 5000 times more than during the dot-com era, with trillions of dollars being poured into AI infrastructure. Burry argues that the maintenance capex on AI is going to shock investors, as the returns on capital are set to crater, potentially hurting future investment.
He also pointed out that AI companies are overspending on microchips and data centers, leveraging off-balance-sheet structures to hide risk, and striking circular financing deals to keep the AI buzz going. Despite Burry's warnings, major US stock indexes have largely ignored his concerns and continued to reach new record highs.
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