Michael Barry has sparred with AI bulls like Elon Musk and Alex Karp, but Gavin Baker says he appreciates Barry’s thoughtful critiques of the latest technology boom.
“We’re very grateful to Michael Burley,” Atreides Management Managing Partner and Chief Investor Michael Burley said on the latest episode of the Generating Alpha podcast. “His Substack, it’s a godsend.”
Baker, an early investor in Tesla, SpaceX and Nvidia, described Barry as “a really smart, intelligent guy who makes really credible bearish arguments every day.”
“We want that,” he continued. “What we’re looking for is really smart people who are definitely going to beat the bearish drum.”
Burley, the investor known for “The Big Short,” transitioned from running a hedge fund to writing about personal portfolios for Substack late last year.
He warns that Big Tech companies are investing heavily in AI equipment such as Nvidia’s microchips and data centers, creating a capital investment bubble that could burst if demand falls short of expectations.
On the podcast, Baker indicated he was no stranger to Barry and another major bear, GMO co-founder Jeremy Grantham. He agreed with both men, saying that historically, innovative technologies have created bubbles as buzz and speculation took hold, leading to overconstruction and eventual crashes.
“If you look at canals, railroads, radio, the Internet, PCs, everything, you would think there would be an AI bubble,” Baker said.
As a value-conscious investor, he said the outlook was a “disaster” and a “nightmare” that no one would wish for. But he said the market is “clearly not in a bubble” as valuation multiples for tech companies are about the same as they were five or six years ago and have been compressing since early last year.
Baker also said he wasn’t worried about overbuilding because the “scars” of the dot-com bubble are “very deep” and “have put a lid on the valuations of tech companies,” adding that power supply and microchip production constraints will limit construction.
“So I’m optimistic and hopeful that the wattage, wafers and scars of the internet bubble will stop a true bubble from occurring, because that’s the enemy of every long-term investor,” he said.
Mr. Baker may appreciate Mr. Berry’s bearish comments. Because it reminds investors of those scars and the risks they are running, and helps prevent bubbles.
Baker and Barry did not immediately respond to requests for comment from Business Insider.