Investor who predicted 2008 financial crisis comes up with another prediction — this time against AI

Smart investors always have eyes on the numbers and read the pulse of the market, which helps them spot a crisis on the horizon. Michael Burry is one such investor who made a name for himself as the man who predicted the 2008 financial crash that hit the global economy. His story was one of those that inspired a movie called "The Big Short," and now Burry has sounded the alarm on the AI boom. The trader has flagged two companies in particular, Nvidia and Plantir, which are fuelling the AI race. The Scion Asset Management chief took to X after a two-year hiatus to share a series of posts sparking concerns about the AI bubble, causing speculation in the market.

Burry, who was profiled in the 2010 book “The Big Short: Inside the Doomsday Machine,” by Michael Lewis, and portrayed by Christian Bale in the 2015 film adaptation, has come out guns blazing to place his bets against AI. In his first post, sharing an image of Bale portraying him in the movie, Burry wrote, “Sometimes, we see bubbles. Sometimes, there is something to do about it. Sometimes, the only winning move is not to play.” According to Business Insider, the line “Sometimes, the only winning move is not to play” is a reference to the movie "WarGames," in which an AI supercomputer is assigned to run simulations of a nuclear war and learns that all scenarios end in mutual destruction. 

Four days later, Burry shared a series of posts to back up his hunch. In the first post, he shared three images of charts that provided insights into the alleged 'AI bubble'. The first chart showed how the growth of the cloud-computing divisions of Amazon, Alphabet, and Microsoft had slowed down. The second showed that the graph of the U.S. tech sector's capital expenditures had spiked almost exactly as the graph had spiked before the 2008 financial crisis and the 1999-2000 dot-com crash. And, the third chart showed a circular diagram describing how Nvidia and OpenAI fuel the "AI Money Machine". 

Shortly after sharing the posts, Burry's Scion Asset Management disclosed that it placed bets against two AI giants, Nvidia and Plantir, in a Securities and Exchange Commission filing. The hedge fund bought about $187.6 million in puts on Nvidia and $912 million in puts on Palantir, according to the filing, The Independent reported.

Responding to Burry's messages, Palantir CEO Alex Karp blasted the investor for making negative bets. “The two companies he’s shorting are the ones making all the money, which is super weird,” Karp told CNBC’s “Squawk Box.” “The idea that chips and ontology are what you want to short is bats--- crazy," he added. 

Burry's bets come at a time when investors have expressed concerns over expensive valuations and the market being concentrated on a few large companies. Following Burry's revelations, Palantir shares fell 8% on Tuesday despite the software company beating Wall Street estimates for the third quarter. On the other hand, Nvidia's share fell 4% after gaining over 50% this year, as per CNBC. This isn't the first time Burry made public calls about a market bust. Earlier in 2023, he took to social media to urge people to “sell,” before adding two months later, “I was wrong to say sell," The Independent reported. 

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