BREAKING: Renowned investor Michael Burry, famous for his role in “The Big Short,” has issued a stark warning about the future of Big Tech. In a newly released Substack post, Burry claims that the rise of artificial intelligence (AI) is transforming these tech giants into capital-intensive enterprises, ultimately threatening their profitability.
Burry, who runs Scion Asset Management, expressed concerns that the return on invested capital (ROIC) for major tech companies like Microsoft, Google, and Meta is on the decline. He pointed out that AI is shifting these companies away from their historically asset-light models towards a demanding future filled with hefty investments in infrastructure such as data centers and chips.
In his exchange with tech podcaster Dwarkesh Patel, Burry emphasized the critical importance of ROIC, stating, “The measure to beat all measures is return on invested capital, and ROIC was very high at these software companies. Now that they are becoming capital-intensive hardware companies, ROIC is sure to fall, and this will pressure shares in the long run.”
Burry’s analysis comes at a time when leading AI firms are heavily investing in capabilities to support their energy-intensive applications. Despite this spending, they have yet to demonstrate significant profit returns from their AI initiatives. Burry’s comments echo a growing sentiment among investors: the current AI boom could be reminiscent of the late-1990s dot-com bubble.
He warned, “At some point, this spending on the AI buildout has to have a return on investment higher than the cost of that investment, or there is just no economic value added.” Burry has notably positioned his hedge fund against AI leaders, including Nvidia and Palantir Technologies, both of which are under scrutiny as the industry faces potential downturns.
Burry’s cautionary stance has sparked discussions about the sustainability of AI investments. As tech giants ramp up their AI efforts, the question remains: will these strategies yield the returns investors expect, or are we on the brink of a financial reckoning?
With AI spending soaring, Burry’s fears highlight a pivotal moment in technology investment. He speculated that many AI companies could face bankruptcy if profitability doesn’t improve, foreshadowing a potential economic panic in 2026 or 2027.
As this story develops, investors and tech enthusiasts alike are urged to stay informed about the implications of Burry’s insights. The financial landscape is shifting, and the future of Big Tech may hang in the balance.
Stay connected for the latest updates on this urgent financial situation.
