{"id":18486,"date":"2025-12-03T17:26:16","date_gmt":"2025-12-03T11:56:16","guid":{"rendered":"https:\/\/trending.niftytrader.in\/?p=18486"},"modified":"2025-12-03T17:26:16","modified_gmt":"2025-12-03T11:56:16","slug":"michael-burry-warns-ai-bubble-nvidia-palantir-crash","status":"publish","type":"post","link":"https:\/\/www.niftytrader.in\/markets\/michael-burry-warns-ai-bubble-nvidia-palantir-crash\/","title":{"rendered":"Michael Burry Warns AI Bubble Could Burst Harder Than 2000, Hitting Nvidia and Palantir the Most"},"content":{"rendered":"

Michael Burry \u2014 the contrarian investor made famous by The Big Short<\/em> \u2014 has issued a strong warning about what he sees as a dangerously inflated artificial intelligence bubble. In a conversation with author Michael Lewis, Burry argued that today\u2019s AI-driven excitement is more extreme, more fragile and more structurally risky than the dot-com boom that led to the collapse of Nortel and Cisco in 2000.<\/p>\n

According to Burry, the scale of today\u2019s market euphoria is not<\/em> being fully recognised, and investors may be substantially underestimating how painful the eventual correction could be. He believes companies like Nvidia and Palantir sit directly at the centre of what he describes as a \u201crunaway capex cycle\u201d that is pushing valuations into unsustainable territory.<\/p>\n

Runaway Capex Cycle Signals a Deepening AI Bubble, Says Burry<\/h2>\n

Burry explained that the defining feature of the current AI mania is the extraordinary acceleration in capital expenditure across the technology sector. He compared this pattern to the fibre-optic and router investment spree of the late 1990s \u2014 but said today\u2019s version is even more intense in important ways.<\/p>\n

He pointed to what he called a \u201cnet investment mania\u201d in AI, where investment continues to grow rapidly even as market signals start flashing red. In the late 1990s, the Nasdaq index peaked before telecom investment slowed; today, Burry sees the same cycle repeating, except with higher speed and larger flows.<\/p>\n

A critical problem, according to him, is that markets are now incentivising companies to announce<\/em> spending rather than generate returns. Burry claimed:<\/p>\n

\u201cIf you announce a dollar of capex on AI, your market cap will go up three dollars.\u201d<\/p>\n

He argued that this reflexive behaviour \u2014 where spending itself becomes the driver of valuation \u2014 is one of the clearest signs of an overheated cycle. Companies like Nvidia and Palantir, he said, have become the biggest symbols of this enthusiasm, even though neither originally built their core products specifically for AI workloads.<\/p>\n

Also Read<\/strong>: Rupee\u2019s Sharp Slide Past 90 Sparks PE Exit Concerns<\/a><\/em><\/p>\n

Why Burry Says Nvidia and Palantir Are \u201cThe Two Luckiest Companies on the Planet\u201d<\/h2>\n

Burry described Nvidia and Palantir as \u201cthe two luckiest companies on the planet,\u201d but for very different reasons.<\/p>\n

Nvidia, he argued, benefited from two<\/em> major waves entirely outside its original business design \u2014 the crypto mining boom and now the generative AI surge. He characterised Nvidia\u2019s fortunes as the outcome of being in the right place at the right time rather than building products specifically for these cycles.<\/p>\n

For Palantir, Burry said the company executed a rapid pivot after the rise of ChatGPT. According to him, Palantir began re-labelling its existing consulting-heavy software offerings as \u201cAI,\u201d during a period when corporations were eager to showcase internal AI adoption. This allowed Palantir to ride the wave of demand from companies trying to demonstrate that they had \u201cAI-ed something,\u201d in his words.<\/p>\n

However, Burry said the company\u2019s underlying economics remain weak. Burry Questions Palantir\u2019s Profitability and Valuation<\/p>\n

A major point of criticism from Burry is Palantir\u2019s approach to profitability. He said much of the company\u2019s reported income is an \u201cillusion\u201d because it relies heavily on stock-based compensation.<\/p>\n

He argued that when stock grants are treated as a true expense, Palantir\u2019s profitability becomes far less impressive. With a substantial portion of income effectively consumed by stock payouts, the company must then buy back shares simply to offset dilution \u2014 a cycle Burry views as unsustainable.<\/p>\n

He also highlighted Palantir\u2019s valuation, pointing out a metric he found unprecedented:<\/p>\n

\u201cFive billionaires came out of roughly four billion dollars of revenue.\u201d<\/p>\n

For Burry, this ratio was something he said he had \u201cnever seen before,\u201d and it reinforces his view that Palantir\u2019s valuation sits far above reasonable levels.<\/p>\n

Why Burry Thinks the Coming Crash Will Be Worse Than Nortel and Cisco in 2000<\/h2>\n

Burry\u2019s thesis on why the AI correction could be sharper than the Nortel-Cisco cycle rests on two pillars:<\/p>\n

    \n
  1. \n

    Today\u2019s bubble is bigger and more reflexive, driven by hype-based capex and thin monetisation.<\/p>\n<\/li>\n

  2. \n

    Market structure has fundamentally changed, making a downturn more dangerous.<\/p>\n<\/li>\n<\/ol>\n

    Burry said that in the late 1990s, the telecom bubble expanded rapidly but still operated within an environment dominated by active investors. Today, passive investing \u2014 through index funds and ETFs \u2014 represents more than half of all US equity assets.<\/p>\n

    This shift, he said, has removed a stabilising buffer from the system.<\/p>\n

    According to Burry, the dominance of passive flows means that once selling pressure begins, there may be no meaningful group of active buyers willing to absorb falling prices. He warned:<\/p>\n

    \u201cWhen the market goes down now\u2026 the whole thing is just going to come down.\u201d<\/p>\n

    In his view, passive investing amplifies bear markets because it enforces selling mechanically rather than selectively. Once large names like Nvidia or Palantir start falling, index-linked flows could intensify the decline, creating a cascading effect.<\/p>\n

    Burry\u2019s Final Warning: Thin Monetisation and Reflexive Capex Make AI Fragile<\/h3>\n

    For Burry, the core issue is that today\u2019s AI boom is built on hype-driven capital expenditure, weak monetisation and extreme investor reflexivity. Companies are rewarded for spending rather than earning, valuations rise based on announcements rather than revenue, and passive flows underpin the entire market structure.<\/p>\n

    These conditions, he said, are not just signs of a bubble \u2014 they are signs of a bigger<\/em>, faster<\/em> and more dangerous<\/em> bubble than the one that toppled Nortel and Cisco.<\/p>\n

    Burry believes the unwinding of this cycle will be sharper because both fundamentals and market plumbing are misaligned. With Nvidia and Palantir at the centre of this frenzy, he argues that the eventual correction could be deeper than investors currently expect.<\/p>\n

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    Michael Burry \u2014 the contrarian investor made famous by The Big Short \u2014 has issued a strong warning about what he sees as a dangerously inflated artificial intelligence bubble. In a conversation with author Michael Lewis, Burry argued that today\u2019s AI-driven excitement is more extreme, more fragile and more structurally risky than the dot-com boom […]<\/p>\n","protected":false},"author":6,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1365],"tags":[],"ppma_author":[1383],"class_list":{"0":"post-18486","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business-news"}," _eael_post_view_count":0,"authors":[{"term_id":1383,"user_id":6,"is_guest":0,"slug":"pradeep","display_name":"Pradeep Sangatramani","avatar_url":{"url":"https:\/\/trending.niftytrader.in\/wp-content\/uploads\/2025\/09\/Pradeep-Sangatramni.jpeg","url2x":"https:\/\/trending.niftytrader.in\/wp-content\/uploads\/2025\/09\/Pradeep-Sangatramni.jpeg"},"0":null,"1":"","2":"","3":"","4":"","5":"","6":"","7":""}],"_links":{"self":[{"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/posts\/18486","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/comments?post=18486"}],"version-history":[{"count":1,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/posts\/18486\/revisions"}],"predecessor-version":[{"id":18488,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/posts\/18486\/revisions\/18488"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/media\/18487"}],"wp:attachment":[{"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/media?parent=18486"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/categories?post=18486"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/tags?post=18486"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/ppma_author?post=18486"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}