Why Michael Burry Thinks AI Is a Bubble

Investor Michael Burry, known from The Big Short, warns that the AI bubble could start bursting within the next two years. He draws a parallel to the dot-com mania, when stock prices peaked long before actual technology spending took off.

“Every previous bubble shows that the market peak comes before even half of the capital expenditures have been made,” Burry said on Michael Lewis’s podcast Against The Rules: The Big Short Companion. “In most cases, capital expenditures hadn’t even reached their peak,” he added.

His rare interview with Lewis comes amid his growing focus on what he sees as a nascent bubble in the AI sector. Burry emphasizes that companies like Palantir are more providing “consulting services” in AI rather than developing core technology, making their high valuations hard to justify.

Burry, who recently deregistered his hedge fund and started a Substack blog, advises investors to consider selling positions that have surged in the latest wave of AI euphoria. He warns that any potential decline this time may not resemble the dot-com crash, but could be more prolonged. The reason: many individual investors today invest passively through index funds and ETFs heavily concentrated in AI-related companies.

“I think all of this is going to start falling,” Burry said. “It’s going to be very hard to hold long positions in the U.S. market while protecting yourself at the same time.”

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He is particularly critical of Palantir, expecting its stock to drop sharply from current levels. The company has risen nearly 130% in 2025 and over 2,100% in the past three years.

Burry says he will instead focus on healthcare stocks. This segment of the S&P 500 has grown about 11% over the last three years, while the broader index has added more than 68%.

“They are completely overlooked,” he commented about the healthcare sector.

Burry also criticizes Bitcoin, claiming the digital currency has no intrinsic value and promotes illegal activity. The cryptocurrency climbed above $92,500 on Wednesday after a period of high volatility.

“This is our modern-day tulip bubble,” Burry said. “But it’s even worse because it enables so much criminal activity.”