Crypto
19 Dec 2025
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Michael Burry Substack AI bubble warnings How to spot risks *
Michael Burry Substack AI bubble warnings reveal clear indicators and steps to protect your portfolio.
Michael Burry is writing again, and he is not holding back. In a burst of posts and a podcast chat, he has warned that AI hype looks like a bubble and laid out signs to watch. These Michael Burry Substack AI bubble warnings focus on slowing real growth, rising spending, and accounting that flatters profits.
Burry, the investor from The Big Short, has shifted from short bursts on X to longer notes on his Substack, “Cassandra Unchained.” He says the market could face “a number of bad years.” He is sharing how he thinks, where he sees risk, and how he invests his own money. His goal is simple: cut through the buzz and test the numbers.
How to read Michael Burry Substack AI bubble warnings
Why he is speaking now
Burry closed his hedge fund to new outside money. He returned to posting on X in late October after a long break. He now writes detailed notes on Substack, and he joined Michael Lewis for a podcast that he suggests may be his last interview. The tone is direct. He explains his calls, lists the data he tracks, and names the trades he likes and dislikes.Core claim: AI looks like a classic mania
Burry compares the current AI excitement to the dot-com bubble and the mid-2000s housing boom. In his view, stock prices and capital spending have raced ahead of true demand. He expects the AI trade to unwind within two years. He advises anyone sitting on big wins to take some gains and reduce risk.What Burry sees inside the AI trade
Slowing demand versus record spending
Burry notes signs that cloud-computing growth is slowing. At the same time, big tech firms are spending more than ever on data centers and AI chips, especially from Nvidia. That gap worries him. If growth cools while spending soars, returns will fall. Capital can get trapped in hardware that turns old fast or never earns back its cost.Accounting and incentives that stretch the story
He calls out two accounting practices that can make earnings look stronger today: – Companies extend the useful life of servers and chips. This slows depreciation and boosts short-term profit, even if the gear may wear out or become obsolete faster than the books imply. – Heavy stock-based pay reduces true owner returns. It shows up as an expense, but dilution can still hide how much value goes to employees instead of shareholders. He also flags “give-and-take” deals among tech firms. For example, one company may buy compute credits from another while the other buys software or services back. Everyone reports revenue, and the hype stays alive, but real net demand may be lower than the headlines suggest.- Cloud growth slowing while capex hits records
- Depreciation stretched to flatter earnings
- Stock-based pay dilutes owners
- Circular “you buy mine, I buy yours” contracts
- Marketing buzz outpacing proven use cases
His positions and time horizon
Bets against the favorites
Burry says he is short market leaders like Nvidia and Palantir. He calls OpenAI “the Netscape of our time” and claims it is “hemorrhaging cash.” He thinks the AI bubble will burst within two years. That timing matters. It means he expects pressure to show up well before decade-long AI visions become real. He urges investors who rode the rally to lock in gains. If a stock looks priced for perfection, he prefers to take chips off the table. As he puts it, a number of bad years could be ahead for the broad market if profits fail to keep up.Where he still finds value
He has held gold since 2005 as a long-term hedge. Among the mega-cap tech names, he calls Alphabet the value investor’s favorite. That implies he sees steadier cash flows and lower hype relative to certain AI peers. He also shared that he knows Nvidia’s CFO, Colette Kress, and owned Nvidia shares years ago, which shows he is not anti-tech; he is anti-hype.Beyond AI: the macro backdrop
The Fed and the cost of money
Burry argues the Federal Reserve has done “a lot of damage” since its start. He says the Fed does not do “anything very helpful” and suggests the Treasury could manage interest rates and the money supply instead. Whether you agree or not, his point is clear: easy money creates bubbles; tight money pops them. In a tighter world, prices must line up with profits, not dreams.Banks and fault lines in the system
He warns the US banking system shows “fragility,” and says banks are “getting weaker way too fast.” That matters for risk assets. Weak banks lend less, credit gets tight, and growth slows. In that setting, stretched valuations are most exposed. He also defends past calls on regional banks, pandemic-driven inflation, and meme stocks. He admits he missed GameStop’s sudden 2021 surge; he had sold before the spike and says he had “no idea what was coming.” He plans to publish a fresh take on the stock now.- Own portfolio includes Lululemon, Molina Healthcare, Shift4 Payments, Fannie Mae, and Freddie Mac
- Long gold since 2005
- Sees Alphabet as the best value among mega-cap tech
- Predicts tough years for stocks if profits lag
- Bitcoin near $100,000? He calls that “ridiculous” and says it is “not worth anything,” now below $90,000
Practical ways to spot risk now
Start with the business, not the buzz
Ask simple questions:- Are customers paying more or less over time?
- Is revenue growth coming from real adoption, or big one-off deals?
- Does usage growth match the jump in capital spending?
- Are pilots moving to paid contracts with solid margins?
Read the numbers with a skeptic’s eye
You do not need to be an accountant to test the claims:- Depreciation: Did the company extend the life of servers and chips? If so, current profit may be inflated.
- Stock-based pay: How big is it versus revenue? Big dilution can cap future returns.
- Free cash flow: Is the company producing cash after big capex, or only earnings on paper?
- Customer notes: Does the filing mention “commitments,” “credits,” or “barter-like” deals?
Watch for market telltales
Manias have patterns. Burry points to echoes of the late 1990s:- Leaders trade at extreme price-to-sales ratios
- Index gains hinge on a small set of names
- Companies cross-buy from each other to keep growth optics strong
- Journal narratives run ahead of audited results
Build a margin of safety
Burry’s stance suggests a few risk controls:- Trim positions that outran fundamentals; take some profits
- Avoid leverage and complex options unless you can afford a total loss
- Diversify across sectors and factors, not just many tickers in one theme
- Hold some cash or short-term Treasurys to stay flexible
- Consider hedges like gold if they fit your plan
What to make of the message
Signal over noise
The Michael Burry Substack AI bubble warnings are not a blanket call to flee tech or AI. He is saying the math must work. If spending, dilution, and accounting tricks carry results today, the payback must appear tomorrow. If not, prices will adjust. His track record shows he prefers hard data over groupthink, even if he is early.Applying the checklist
Use his lens in your own process:- Map revenue growth to capex and share count
- Stress-test valuation against normalized free cash flow
- Discount “circular” deals and marketing-heavy boosts
- Lower expectations where hardware cycles are short and costly
FAQ
Q: What is Michael Burry’s main warning about AI in his recent Substack posts?
A: The Michael Burry Substack AI bubble warnings focus on slowing real growth, rising spending, and accounting that flatters profits. He compares the AI mania to the dot-com and housing bubbles and predicts the AI trade could unwind within two years, urging investors to consider taking gains.
Q: Which internal practices in tech companies does Burry say are inflating profits?
A: He calls out stretched depreciation schedules that slow the write-down of servers and chips, heavy stock-based compensation that dilutes owners, and circular “give-and-take” contracts where firms buy from each other to book revenue. Those practices can make short-term earnings look stronger even if underlying demand and returns lag.
Q: How does Burry recommend investors read and test the claims behind AI hype?
A: The Michael Burry Substack AI bubble warnings urge investors to “read the business, not the buzz” by matching revenue growth to capex, checking free cash flow, and looking for commitments or credits in filings. He also recommends stress-testing valuations against normalized cash flow and questioning whether pilots are turning into paid contracts.
Q: What positions has Burry disclosed and where does he still find value?
A: He has disclosed short positions against market leaders like Nvidia and Palantir and said he advises locking in gains on high-flying assets. He also shared holdings such as Lululemon, Molina Healthcare, Shift4 Payments, Fannie Mae, and Freddie Mac, said he has owned gold since 2005, and called Alphabet a value investor’s favorite.
Q: What does Burry say about the Federal Reserve and the US banking system?
A: He argued the Fed has “done a lot of damage” and said it does not do “anything very helpful,” even suggesting the Treasury could set interest rates and control the money supply. He warned the US banking system shows signs of fragility and that banks are “getting weaker way too fast,” which would tighten credit and slow growth.
Q: What practical risk controls does Burry suggest investors use during the AI rally?
A: The Michael Burry Substack AI bubble warnings recommend trimming positions that outran fundamentals, avoiding leverage and complex options, diversifying across sectors, and holding some cash or short-term Treasurys for flexibility. He also suggests considering hedges like gold and taking some profits rather than assuming prices will keep rising.
Q: How did Burry describe bitcoin in his recent comments?
A: He called bitcoin trading at $100,000 “the most ridiculous thing” and said it was “not worth anything,” adding that it was worse than a tulip bulb because it has enabled so much crime. At the time of his comments the most popular cryptocurrency was trading below $90,000.
Q: Why has Burry moved his commentary to Substack and what is “Cassandra Unchained”?
A: He closed his hedge fund to outside money, returned to posting on X in late October, and shifted to longer, detailed notes on Substack while joining a podcast interview with Michael Lewis that he suggested may be his last. “Cassandra Unchained” is the name of his Substack where he is speaking freely, explaining the data he tracks and the trades he favors.
* The information provided on this website is based solely on my personal experience, research and technical knowledge. This content should not be construed as investment advice or a recommendation. Any investment decision must be made on the basis of your own independent judgement.
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