The Big Short investor Michael Burry has maintained bearish bets against some of the most prominent names in the artificial intelligence sector.
Burry, made famous by his portrayal in The Big Short, is currently short Nvidia (NASDAQ: NVDA), Palantir (NASDAQ: PLTR), and Tesla (NASDAQ: TSLA), warning that an AI bubble could trigger a “1987-type fall.”
Writing in his Substack newsletter, Burry raised concerns about rising leverage in markets, a point that analysts acknowledge carries genuine weight.
One specific risk he flagged involves funds like the GraniteShares 2x Long NVDA Daily ETF (NASDAQ: NVDL), which is forced to buy more Nvidia shares as the chipmaker continues to rally.
Total margin debt increased by 50% year over year in June, a level of leverage that can accelerate rallies but also produce sudden, severe crashes.
The dangers of that leverage were demonstrated when Leopold Aschenbrenner’s highly leveraged Situation Awareness hedge fund was liquidated after declining stock prices wiped out its high-leverage bets on AI stocks.
Aschenbrenner’s $45 billion fund liquidated almost overnight, catching markets by surprise and helping explain why AI stocks had been slumping for weeks prior.
Even investors who avoid leverage personally can be dragged down by margin calls elsewhere, as forced selling can turn modest corrections into much larger declines.
However, Burry’s broader bearish thesis on AI fundamentals appears far less convincing than his leverage concerns, given the sector’s strong revenue growth and rising profit margins.
The current AI boom differs meaningfully from the dot-com era, where companies carried sketchy fundamentals and questionable long-term growth prospects, whereas today’s AI leaders show real demand and real profits.
Consumer adoption of AI tools like ChatGPT and Gemini continues to grow, while physical AI applications such as humanoid robots and autonomous vehicles are gaining serious commercial traction.
The margin unwind connected to Situation Awareness also suggests there may not be a dramatic 1987-style collapse, and could instead represent a buying opportunity for patient, long-term investors.
Burry has a track record of bold market warnings that never materialised, and while he earned fame for his pre-recession call, repeated crash predictions since then have largely proven wrong.
His bets are frequently structured through put options, which carry expiration dates, meaning his positions are tactical and short-term rather than long-horizon conviction trades.
One recent example stands out: Burry disclosed a short position in Nebius Group (NASDAQ: NBIS) on August 6, after which the neocloud delivered strong earnings and rose roughly 20% since that disclosure.
The fundamental story for AI remains solid and continues to strengthen, even as the risks from excess leverage in the broader market deserve serious attention from all investors.
