Michael Burry Warns of “AI Bubble Greater Than 2000’s Dot-Com Crash”

Michael Burry Warns of “AI Bubble Greater Than 2000’s Dot-Com Crash”
London, 7 November 2025
Michael Burry, the investor famous for predicting the 2008 housing market collapse, has warned that Palantir [+3.16%] and Nvidia [−1.03%] sit at the centre of an artificial intelligence bubble more dangerous than the dot-com crash that devastated Cisco [+1.14%] in 2000.
According to filings, Burry has purchased two-year put options against both companies, signalling a bet that their valuations could fall sharply.
💬 “A Reflexive Loop of AI Spending”
In a post that quickly spread through financial circles, Burry argued that markets have entered a “reflexive loop” where companies are rewarded simply for announcing AI-related spending.
He described the phenomenon as follows:
“Every one dollar of capital expenditure on AI now adds three dollars in market value.”
Burry claims this feedback loop has created distorted incentives, with hyperscale firms extending the depreciation schedules of GPUs to artificially boost earnings, despite the rapid obsolescence of AI hardware.
⚠️ Limits to AI Monetisation
The investor contends that the monetisation of artificial intelligence faces structural limits, as most consumers can already access powerful language models at free-tier levels.
He added that corporate enthusiasm has outpaced sustainable profitability, warning that much of the sector’s current growth is driven by valuation reflex rather than real earnings.
Burry singled out Palantir, arguing that its profitability becomes “an illusion once stock-based compensation is treated as a real expense.”
Palantir CEO Alex Karp dismissed the remarks as “utterly insane,” insisting that the company’s government and defence AI contracts remain robust.
🧩 FLASHOP Editorial Perspective
Burry’s warning injects a rare note of caution into the euphoric AI narrative.
“Every technological revolution creates real progress — and a speculative shadow.”
As investors chase the next AI frontier, distinguishing between true adoption and financial reflex becomes critical.
For platforms like FLASHOP, it serves as a reminder that AI’s value must rest on function, not just hype.