Michael Burry, the investor who famously predicted the US subprime mortgage crisis, has raised concerns about a potential AI bubble. This week it emerged that Burry placed a $1.1 billion bet against Nvidia and Peter Thiel’s Palantir, positioning himself to profit if their stock prices decline.
Burry’s skepticism reflects a broader unease among market leaders. Jamie Dimon, CEO of JP Morgan, has warned that US tech stocks may be overvalued, while executives at Morgan Stanley and Goldman Sachs have also flagged risks of a market correction. Even major tech figures like Amazon founder Jeff Bezos have suggested that AI-related investments may be overheated, while OpenAI chief Sam Altman admitted that valuations and spending in the sector have accelerated rapidly.
The scale of AI investment is staggering. Microsoft reported nearly $35 billion in capital expenditure in a single quarter, most of it AI-related. Meta plans to spend up to $72 billion this year, Alphabet up to $93 billion, and Amazon $125 billion, largely on data centres, high-end chips, and AI research. These figures far exceed the annual budget of some countries; Microsoft alone spent more than three times Ireland’s 2026 national budget in one quarter.
Despite this massive outlay, most tech companies are not yet seeing returns. A recent MIT study found that 95% of firms reported zero profit from their AI investments. Meta, Alphabet, and Microsoft have yet to show significant benefits, while dedicated AI firms are also running losses. OpenAI reported a $5 billion loss last year, Elon Musk’s xAI is expected to lose $13 billion, and Anthropic lost $5.3 billion.
Nvidia, however, is a clear winner. Its chips power AI data centres worldwide, and the company has become the most valuable publicly listed firm. Profits soared from $2.8 billion in 2020 to $26.4 billion in a single quarter between May and July, and Nvidia is on track for over $100 billion in profit this year.
Investments in AI are increasingly circular. OpenAI recently struck a $300 billion deal with Oracle for data centre capacity. Oracle, in turn, is spending tens of billions on Nvidia chips, while Nvidia has invested $100 billion in OpenAI. Analysts warn that this interconnected spending amplifies the potential impact if valuations collapse.
Experts caution that even if the AI bubble does burst, some companies may survive, similar to the Dot Com crash, which destroyed many firms but left giants like Amazon and Google thriving. However, a major correction could disrupt jobs, investment, and broader economic growth, particularly given the central role of AI in US corporate expansion.
While Burry’s bet signals caution, it may take years to see whether the market correction materializes, echoing his experience with the subprime mortgage crisis. For now, the AI boom continues to drive massive spending, high valuations, and heated debate over the sector’s long-term sustainability.
