The S&P 500 has climbed for the past three calendar years, and in spite of various headwinds this year, it’s continued to trek higher. Leading this march are companies that play a major role in the artificial intelligence (AI) space. And investors have generally been piling in, with the idea of benefiting from this boom today and into the future.
But one expert investor in particular has taken just the opposite position. Michael Burry, who shot to fame after predicting the U.S. subprime market crash, increased his bets against AI stocks last year and, in recent times, reiterated his concerns and adjusted his positions accordingly.
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Now, just hours ago, Burry delivered his bluntest warning yet regarding AI stocks. Should you listen? Let’s take a closer look.
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Burry made $700 million for clients during the housing market crash
First, let’s start by zooming in on Michael Burry. The hedge fund manager, seeing weakness in the U.S. housing market in the early 2000s, placed massive bets against it. His moves, controversial at the time, ended up making $700 million for his clients. The story of Burry and others who predicted the housing market collapse was documented in the movie The Big Short several years later.
Since that time, investors have looked to Burry, with the idea that he may once again predict the next big stock market move. Burry no longer runs a hedge fund — he deregistered his firm Scion Asset Management with regulators last year. He continues to invest, though, and he shares his thoughts about the market in a newsletter.
As mentioned, Burry has been bearish on AI stocks for well over a year, betting against some of the biggest names in the space, from Nvidia to Micron Technology. He’s written about a potential bubble forming and a crash that eventually may unfold. And he’s just grown even more bearish on the space, issuing his bluntest warning yet.
“The bubble in AI may burst sooner than later,” he wrote in his newsletter on Monday, according to CNBC. Burry cited a report by Ares Management that said the AI boom has been depending on the assumption that AI capital spending will continue at high levels.
Burry shifts his AI positions to bet on a shorter time frame
Against this backdrop, Burry shifted to put options from short positions in certain AI stocks, a move that could result in greater gains over a shorter timeline.
