Burry Warns of AI Bubble Burst: But Is He Right This Time?
Michael Burry, known for his depiction in The Big Short, is warning of a potential '1987-type fall' for AI stocks. He's short Nvidia (NVDA), Palantir (PLTR), and Tesla (TSLA) and believes the AI bubble will burst.
Burry pointed out that a rising stock market forces certain funds to increase leverage, which can lead to harsh crashes. The GraniteShares 2x Long NVDA Daily ETF (NVDL) is an example of this, as it's forced to buy more shares of Nvidia as the chipmaker rallies.
The risk of margin debt was highlighted by Leopold Aschenbrenner's highly leveraged Situation Awareness hedge fund being liquidated due to declining stock prices. The $45 billion fund had high-leverage bets on hot AI stocks and lost nearly its entire value overnight.
Burry made a valid point about leverage, but his concerns about an AI bubble are 'vastly overblown,' according to the article. The fundamental story for AI is solid and strengthening, with real demand, revenue, and profits driving growth.