Michael Burry, the contrarian investor who caused the 2008 financial crisis, is back with his unique blend of dire warnings, cryptic messages, winking memes, and pop culture references.
The head of Scion Asset Management returned to Company X after a two-year break to sound the alarm on the AI boom. While his proponents see innovative technology that dramatically increases productivity and generates huge profits, he sees hype, speculation, and excess.
Barry, whose iconic bet on the mid-2000s housing bubble was immortalized in the book and movie “The Big Short,” began his comeback Thursday with a single, ominous post.
“Sometimes you see a bubble. Sometimes you need to do something about it. Sometimes the only way to win is not to play,” he wrote.
The third sentence is an homage to the movie Wargames, in which an AI supercomputer runs thousands of simulations of nuclear war, all of which end in mutual destruction. Barry’s words underscore how dangerous he believes today’s markets are for investors.
The famous forecaster hinted he would be sticking around for a while, updating his profile picture and amending his bio to read:
Screenshot of Michael Burry’s X profile. ×
The line is an apparent reference to the Greek myth of Cassandra, the Trojan priestess who was cursed to make true prophecies but never be believed, and to a talk Barry gave at Vanderbilt Medical Center in 2011 titled “Failure to Mayhem: Inside the Doomsday Machine with Outsiders Who Profited from Predicting America’s Financial Armageddon.”
At the time, Berry explained step-by-step how the subprime mortgage bubble inflated, how he predicted and bet on its collapse, and how the aftermath revealed glaring vulnerabilities in the U.S. financial system.
“We must remember that society as a whole can and often does go down the wrong path for a very long time, and that there is nothing wrong with deviating from social norms to ensure positive outcomes,” Barry said. “A calm individual analysis is most important.”
Barry sees himself as a Jedi fighting the Empire.
Barry positioned himself as a rebel against mainstream AI, replacing the banner image of X with a still image from Star Wars: A New Hope. There, Obi-Wan Kenobi uses Jedi mind tricks to deceive Imperial Stormtroopers.
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Referring to the meme, Scion’s boss posted on Monday ahead of the company’s Q3 portfolio update: “These are not the charts you’re looking for. You can get on with your job.” He attached three images that provide new insight into why he’s bearish on the AI craze.
The first chart showed that growth at Amazon and Alphabet’s cloud computing divisions has slowed sharply, and slightly at Microsoft’s rival division.
The second highlighted that capital investment in the U.S. tech sector soared during the AI boom, mirroring the surge before the dot-com crash and the 2008 financial crisis.
The third shows circular deals between Nvidia, OpenAI, Oracle, Microsoft, and other AI companies.
Burley nods to the meme again in a follow-up post, writing, “Move forward,” and attaching an image of a Stormtrooper. He also shared highlighted excerpts from Capital Account, a book about the dot-com bubble. The article details how the boom and bust in telecoms created vast tracts of unused infrastructure, caused prices to collapse, and bankrupted many highly valued companies as they scrambled for protection from creditors.
Burry’s post highlights his skepticism about the AI boom. He seems to see shadows of the dot-com bubble in the interwoven deals between big tech companies. Both companies have poured hundreds of billions of dollars into building massive infrastructure that could end up sitting idle if demand slumps and valuations plummet, as they did 25 years ago.
Burry made a bet against Nvidia and Palantir
The hedge fund manager backed up his words with two surprising bets from last quarter revealed on Monday. Psion purchased bearish put options on 1 million shares of Nvidia stock and 5 million shares of Palantir stock, with notional amounts of $187 million and $912 million, respectively.
The company’s U.S. stock portfolio was dominated by bets, with a total of just eight stocks, of which only four were direct positions, worth $68 million.
Russ Mould, investment director at AJ Bell, told Business Insider that Berry “has huge short positions worth approximately $1 billion in both Nvidia and Palantir, the darlings of the current AI boom, and is clearly supporting the conviction with what can only be described as a highly unconventional portfolio.”
Nvidia and Palantir fell 4% and 8%, respectively, on Tuesday. Barry’s bet infuriated Palantir CEO Alex Karp, who questioned why he would short a “profitable” company.
Both stocks have seen their prices soar over the past few years. Nvidia last week became the first company to secure a market capitalization of $5 trillion, while Palantir’s valuation was close to $500 billion as of Monday’s close, more than the value of Mastercard, ExxonMobil and Netflix.
Mold said if the pair’s valuation and high growth expectations don’t meet expectations, the stock could fall sharply, especially as investors increasingly use margin and leveraged ETFs.
Barry could win big if Nvidia and Palantir stumble, but the “danger” is that if the companies continue to impress investors and the Federal Reserve continues to cut interest rates, “we’ll get run over by a market driven by momentum and liquidity,” Mold added.
Daniel Bustamante, founder and chief investor at asset management firm Bustamante Capital Management, told Business Insider that he generally agrees with Barry’s stance on AI stocks.
He said the Magnificent Seven’s capital spending is “already hurting revenue growth, retail is crowded with these companies, and margin debt is at an all-time high.” “Essentially all the tinder is soaked in gas and just burning a lit match at this point will cause serious problems.”
