The AI Boom at a Crossroads: Why Michael Burry and David Rosenberg Are Sounding the Alarm
For months, investors have treated AI as the new gold rush — pouring capital into chipmakers, cloud giants, and software firms with “AI” in their pitch decks. But a growing number of legendary skeptics are now warning that the hype has gone too far.
Michael Burry — yes, the “Big Short” investor who called the 2008 housing crash — has turned his gaze toward the artificial intelligence trade. Meanwhile, veteran economist David Rosenberg has declared that U.S. equities are showing all the classic signs of a bubble. Together, their warnings hint that the so-called “AI revolution” might be heading into its first true stress test.
💥 Burry Bets Against the AI Darlings
According to recent filings, Burry’s Scion Asset Management has taken massive short positions on two of the biggest AI names in the market: Palantir and NVIDIA.
- Roughly $912 million in put options are stacked against Palantir.
- Another $187 million in puts are positioned against NVIDIA.
For those unfamiliar, a “put” is a bet that a stock’s price will fall. And when Burry makes a move like this, markets tend to listen.
His reasoning? Growth in cloud infrastructure and AI spending appears to be slowing, even as companies continue to burn billions on new data centers and GPUs. Burry has hinted that this cycle resembles past speculative manias — where companies chase scale before proving sustainable profit.
📉 Rosenberg’s “Classic Bubble” Warning
David Rosenberg, founder of Rosenberg Research and former chief economist at Merrill Lynch, is taking an even broader view. He says the U.S. stock market is in a “classic price bubble.”
Rosenberg points to the Shiller CAPE ratio — a long-term valuation metric — which is hovering near historical peaks seen before previous crashes. He argues that markets have priced in a near-perfect future for AI and tech, while ignoring the economic slowdown, stretched valuations, and high interest rates that could quickly change the narrative.
His message is blunt: “This ends like every other bubble does — with painful re-pricing.”
⚙️ Why This Matters
The warnings from Burry and Rosenberg aren’t just fearmongering. They reflect a deeper unease about how quickly investor psychology has shifted from caution to mania.
- AI hype vs. fundamentals – While AI models are reshaping industries, most companies haven’t yet found a reliable way to monetize their massive AI investments.
- Excess capital expenditure – Cloud and chip firms are pouring billions into infrastructure, betting that future demand will justify it. But if the adoption curve slows, those assets could become underutilized.
- Behavioral echo of the dot-com bubble – Retail investors and fund managers alike are chasing anything with an AI label, a familiar pattern from 1999.
For traders and quant researchers, this moment is crucial. If your systems or portfolios are overweight on “AI winners,” it might be time to run a few downside scenarios — because the euphoria could be masking hidden fragility.
🧠 Glossary
- Put option – A financial contract giving the holder the right to sell a stock at a fixed price within a certain time frame. Used to profit from declines.
- Short position – Betting that a stock’s price will go down.
- CAPE ratio – A valuation metric comparing stock prices to average inflation-adjusted earnings over ten years; high values often signal overvaluation.
- Cap-ex (Capital Expenditure) – Money spent on long-term assets like data centers, GPUs, or AI infrastructure.
💭 The Bottom Line
The AI narrative is far from over — but that doesn’t mean prices will rise forever. Markets are built on stories, and right now the story of AI dominance is being tested by rising skepticism and slowing momentum.
Whether this turns into a healthy correction or a full-blown bubble burst will depend on whether the technology can start delivering real, scalable profits before the hype runs out of steam.
For now, Burry and Rosenberg are betting that gravity will, once again, do its work.
Source: CNBC – “Michael Burry shorts Palantir and NVIDIA; Rosenberg warns of a classic price bubble”
