Michael Burry, the prominent American investor famous for predicting the 2008 housing crash, now sounds a loud alarm about what he calls an AI bubble. He cautions that major technology companies like Google and Microsoft are investing trillions into infrastructure that might never yield lasting profits.
Burry Compares AI Spending to 1960s Escalator Race
In a recent Substack discussion with Anthropic cofounder Jack Clark and podcaster Dwarkesh Patel, Burry drew a vivid comparison. He referenced a 1960s story about Warren Buffett's Baltimore department store, Hochschild-Kohn.
"When the department store across the street put an escalator in, he had to, too. In the end, neither benefited... That is how most AI implementation will play out," Burry wrote. He believes tech giants are locked in a similar pointless race.
Trillions of Dollars at Risk with No Clear Path
Burry warns that trillions of dollars being poured into AI have no clear path to utilization by the real economy. He feels competitors will all benefit equally, creating no durable advantage for any single company.
"We're past the point where stocks will reward investors for further buildout, and entering the period where the true costs and lack of revenue will start to show themselves," he cautioned. Burry also predicts tech industry employment will stagnate or decline, signaling a prolonged downturn.
Nvidia and Palantir Called 'Poster Children' of AI Hype
Burry specifically named Nvidia and Palantir as prime examples of the AI hype. He described Nvidia as a "power hungry, dirty solution" that holds ground only until more efficient chips arrive. He criticized Palantir CEO Alex Karp for aggressive marketing despite weak fundamentals.
Three Unexpected Developments Highlighted
Burry pointed to three surprising trends in the AI landscape:
- Google's Missteps: "Google playing catch-up to a startup in AI is mind-blowing," he said, highlighting the search giant's struggles.
- ChatGPT's Ripple Effect: He likened OpenAI's chatbot launch to "someone building a prototype robot and every business investing for a robot future," suggesting overreaction.
- Nvidia's Continued Dominance: Burry expressed surprise that more power-efficient chips haven't yet displaced Nvidia's market position.
AI Could Disrupt Careers and Even Make People 'Dumber'
Burry also questioned assumptions about "AI-proof" careers. He noted tools like Anthropic's Claude could replace costly trades. "If I'm middle class and facing an $800 plumber call, I might just use Claude," he said.
He added a stark warning: AI chatbots could even "make people dumber" if professionals like doctors over-rely on them, reducing human expertise and critical thinking.
The investor's warnings paint a cautious picture for the AI boom, urging a reality check on the massive investments and hype surrounding artificial intelligence technologies.
