Why Michael Burry Is Wrong About AI Stocks

Michael Burry deserves every ounce of credit he gets for calling the implosion of the U.S. mortgage-backed securities market long before anyone else had the guts to even whisper the possibility.

He was the guy in the corner reading the fine print while everyone else was too busy popping Champagne corks and counting unearned bonuses. He saw the rot in the housing market with a clarity that bordered on prophetic.

But even the greatest trades in history come with a cost, and Burry paid his in full…

He was so early that investors in his own fund practically revolted. Redemption requests piled up. The pitchforks came out. And the situation became so untenable that he had to restrict redemptions just to keep investors from fleeing en masse.

That’s something few people like to remember about the legend of that trade. The truth is it took three long, painful, reputation-shaking years before his thesis finally came good.

Three years of doubt, frustration, losses on paper, and the constant threat that he’d be “fired” from his own office if not for his absolute conviction.

That’s who Michael Burry is: a visionary who often sees the crack forming in the wall long before anyone else. But that same gift comes with a curse…

Being early sometimes works out brilliantly. But being early also sometimes gets you flattened.

And when it comes to shorting Nvidia and Palantir, the evidence suggests he’s not just early — he’s early in a way that might as well be wrong.

The AI Bubble Question and the Easy Call

People love asking whether AI is in a bubble.

It’s the most popular parlor game in finance right now, the same way everyone in 1999 suddenly became an expert on “irrational exuberance.”

And it’s an easy question to shout from the cheap seats when you look at the charts for Nvidia and Palantir.

These aren’t stocks behaving politely. They aren’t creeping upward like a savings bond. They’re soaring as if gravity suddenly stopped applying to semiconductors and software.

But soaring doesn’t automatically equal a bubble. And expensive doesn’t automatically equal fragile.

Some companies earn their seemingly outrageous valuations by delivering equally outrageous numbers. This is one of those moments…

The valuations are high because the revenue growth is high. The demand is high.

The technological transformation underway is so massive that the market isn’t pricing in hype — it’s pricing in reality.

This isn’t tulips. This isn’t SPAC season. This isn’t Dogecoin because Elon tweeted about it.

This is the biggest technological shift since the invention of the internet, and two companies sit at the absolute center of it.

Nvidia: The New Industrial Superpower

Nvidia isn’t just a chip company anymore. It’s mutated into something much bigger, something more like an industrial superpower.

It supplies the core computational fuel that every AI model, every hyperscale data center, and every global tech platform needs in order to function.

The demand for Nvidia’s chips isn’t strong — it’s overwhelming… Hyperscalers are literally building AI infrastructure so quickly that entire regions are running out of power.

Every quarter, the biggest companies in the world show up at Nvidia’s doorstep like desperate shoppers at a Black Friday sale, hoping to even get their name on a wait list for those must-have Blackwell chips.

And while competitors keep talking about catching up, Nvidia keeps jumping forward.

Its mix of hardware, networking architecture, system design, and proprietary software ecosystem makes it almost impossible to disrupt in the short term.

The company is entrenched. It is accelerating. And it is providing the raw materials of a technological megatrend that is nowhere near mature.

Shorting Nvidia right now is like shorting steel in the 1950s, or oil in the mid-2000s, or the internet in 1997.

Sure, the valuation looks high. But when you’re standing at the base of a mountain, looking up can make you dizzy. But it doesn’t tell you whether you’re close to the summit.

Palantir: The Sleeping Giant Everyone Keeps Underestimating

Palantir is a harder company for some investors to wrap their heads around…

It’s a software platform that sells something intangible and incredibly complex, and that always makes the market nervous. But Palantir’s story isn’t smoke and mirrors.

It’s grounded in contracts, revenue growth, and one of the most fascinating — and underappreciated — business evolutions in tech.

Everyone knows Palantir for its government business. That’s the story that’s been told for a decade.

The CIA, the Army, special forces teams, counterterror analysts — Palantir built software for the people who live and die by the quality and speed of their data.

You don’t get a contract like that unless your product works in the highest-stakes environments on Earth.

But the far more compelling story right now is Palantir’s commercial business…

Companies across industries, from manufacturing to health care to energy, are realizing that they’re buried in oceans of data they’ve never been able to use productively.

Palantir solved that problem for the intelligence community two decades ago. Now it’s solving that problem for the private sector.

And the adoption curve is starting to slope upward in the same way Nvidia’s hardware demand exploded.

Palantir isn’t the quirky niche contractor some still mistake it for. Instead, it’s becoming one of the core enterprise AI platforms of the modern era.

And just like Nvidia, it’s doing it with real revenue, real growth, and real demand — not vibes and marketing slogans.

Valuations That Follow the Money, Not the Hype

This is the part Burry seems to be missing — not because he’s wrong in his thinking but because his thinking is tuned for a different era…

He made his name finding assets whose prices had drifted far away from their fundamentals.

But Nvidia and Palantir aren’t drifting. Their fundamentals are sprinting to keep up with their prices.

Nvidia isn’t priced for perfection. It’s priced for explosive demand and the absolute dominance of its hardware ecosystem.

And Palantir isn’t priced for fantasies. It’s priced for an enterprise AI software revolution that is already underway, with contracts flowing in from both government and corporate customers.

When valuations rise because revenues rise faster, that’s not a bubble. That’s the market saying, “We see what’s happening, and we’re not waiting three years to admit it.”

When the Legend Himself Says He’s Out of Sync

And then there’s the moment that puts all of this into even sharper focus…

Michael Burry officially closed Scion Asset Management yesterday. In his closing statement, he wrote, “My estimation of value in securities is not now, and has not been for some time, in sync with the markets.”

That is as honest and revealing as anything he’s ever said.

It’s a confession that his worldview — the deep-value worldview that served him brilliantly in 2005 — is clashing violently with the market of 2025.

He isn’t saying the market is wrong. But he isn’t saying he’s wrong, either…

What he’s saying is that the two are no longer speaking the same language.

For a value-driven contrarian like Burry, that’s not a tactical issue. It’s a philosophical crisis.

His entire investing framework is built on the idea that markets eventually return to rational pricing.

That worked beautifully in the era of subprime debt, distressed assets, and post-crisis cleanup.

But this market isn’t driven by the value of what exists today. It's driven by the value of the future being built at unprecedented speed.

Closing his fund at the same time he’s betting against the biggest beneficiaries of that future is more than ironic.

It’s a sign that he knows the terrain has shifted beneath his feet, even if he still believes he’ll eventually be right.

But when you’re shorting companies growing this quickly, “eventually” can be the most dangerous word in the dictionary.

The Real Risk: Being Early Is the Same as Being Wrong

In theory, Burry might one day be proven correct that AI enthusiasm overshot rational boundaries.

But being right after years of pain isn’t something most investors can survive. At one point Burry could absorb that kind of punishment. Most people can't (and it looks like he can't anymore, either).

His MBS short required a global financial meltdown, a full freeze of credit markets, and the bankruptcy of institutions considered “too big to fail” just to pay off.

What equivalent meltdown would Nvidia and Palantir require?

A collapse in global compute demand? A sudden reversal of AI adoption? A geopolitical shock that makes countries abandon their race for technological superiority?

A correction may come someday. But “someday” is not an investment thesis.

And right now, the forces driving AI forward aren’t slowing, shrinking, or wobbling. They’re accelerating.

The Reality: AI Spending Is Only Getting Started

Every major economic, technological, governmental, and corporate indicator points in the same direction: AI adoption is accelerating, not decelerating.

Hyperscalers are building data centers at a pace that borders on absurd.

Governments are funneling billions into AI research, defense applications, and national compute infrastructure.

And corporate adoption curves are steepening quarter after quarter.

Every single sector — health care, energy, transportation, defense, finance, logistics, retail — is investing in AI… not as a luxury but as a necessity.

When a technology becomes essential instead of optional, demand behaves differently…

It becomes structural. It becomes self-reinforcing. And it doesn’t roll over at the first sign of a correction.

That’s where AI is right now. It’s no longer a speculative trend. It’s part of the backbone of the next economic era.

The Moats Are Deepening, Not Weakening

Nvidia and Palantir aren’t battling for survival. They’re widening their leads.

Nvidia’s advantage isn’t just raw performance — it’s the ecosystem around its chips, the software frameworks, the networking architecture, and the decades of engineering experience that competitors can’t replicate.

Palantir’s moat isn’t just its government pedigree — it’s its ability to integrate massive, chaotic data systems into a single operational picture faster than any competitor.

These companies aren’t fighting for market share like late-stage tech darlings. They’re defining their markets as they grow.

And that’s the most dangerous kind of competitor to short.

The Smart Money Isn’t Running Away — It’s Digging In

For all the talk of AI bubbles, the biggest investors on Earth are spending more each quarter, not less…

Corporate spending keeps climbing. Government spending keeps climbing. Infrastructure spending keeps climbing.

AI model sizes keep climbing. The demands placed on global compute keep climbing. And the companies with the strongest moats keep pulling further ahead.

If this is a bubble, it’s the most well-funded bubble in human history, backed by revenues, adoption curves, research pipelines, and geopolitical inevitability.

So Is Burry Wrong? Or Just Early Again?

The fairest conclusion is the most obvious one: He’s too early.

But when you’re betting against the fastest-growing, most strategically important sector in the global economy, being early isn’t harmless. It’s fatal.

Burry may eventually have a point about AI exuberance. But between now and that hypothetical moment, Nvidia and Palantir look primed to continue dominating.

They’re backed by revenue, adoption, demand, contracts, and geopolitical necessity — not hype.

Investors who try to mimic Burry’s approach may find themselves sitting on the sidelines during one of the greatest wealth-building eras of the century.

And that’s not smart positioning. That’s self-inflicted portfolio damage.

The Better Move: Ride the Wave, Don’t Fight It

The world is changing. AI isn’t a neat little tech niche you sprinkle into a portfolio — it’s becoming the operating system of the global economy.

Betting against that is like shorting electricity in 1905.

Most investors don’t have Burry’s bankroll or his tolerance for prolonged drawdowns. It looks like Burry might not have them anymore, either.

Fortunately, you don’t need them. You can simply own the companies building the future instead of wagering against them.

Nvidia and Palantir aren’t hype plays. They’re growth engines. They’re revenue machines. They’re irreplaceable pillars of the new digital world. And time is on their side.

Michael Burry might be early again. He might even be brilliant again. But early doesn’t pay the bills unless you can survive the wait.

For the rest of us, the smart move is to stay on the right side of the wave while it’s still gathering strength.