- Michael Burry has moved up his timeline for an AI market correction and increased bearish bets
- He shifted from short positions to put options on major AI stocks to limit capital outlay
- Burry warned the US economy depends on AI and policymakers have limited room for failure
Michael Burry, the investor who gained fame for betting against the US housing market before the 2008 financial crisis, has moved up his timeline for a potential reversal in the artificial intelligence trade. Citing fresh research, Burry said the AI-driven market rally could face a reckoning earlier than he had previously anticipated.
After revisiting his expectations for the timing of a potential AI-led market correction, Burry said he was stepping up the leverage attached to his bearish bets, as he continues to flag concerns over elevated valuations across the sector.
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“Fundamentally, I am moving timelines up. As such, I want more leverage in my short positions. Better timelines make leverage more palatable,” Burry wrote in his Monday investment newsletter, according to CNBC.
Burry Shifts AI Bets To Put Options
Burry has reworked his bearish bets on major AI stocks, shifting away from conventional short positions and towards put options.
The move gives him a way to seek gains from potential declines in these stocks while committing less capital upfront, particularly if the shares fall sharply within a relatively short timeframe.
The change suggests Burry now expects the AI trade to face pressure earlier than his previous timeline. In August, he had indicated that an AI-driven market correction could begin around 2028.
His latest comments, however, indicate that he has brought forward that assessment following research examining the relationship between AI revenues and the enormous capital spending being undertaken by major technology companies.
One Revenue Miss Could Trigger AI Spending Reassessment
Burry cited research from Ares Management that argued the AI investment cycle could come under pressure if AI-related revenues fail to justify the scale of spending by hyperscalers.
The research suggested that a single period of disappointing AI revenue could prompt some technology companies to reconsider their capital allocation.
If boards begin to believe that another investment opportunity offers better returns than AI infrastructure, capital spending could be redirected, potentially putting pressure on the broader AI investment cycle.
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The argument comes as hyperscalers continue to commit billions of dollars to data centres, computing infrastructure and AI development.
Burry Says Trump Administration Cannot Afford AI Boom To Fail
Burry has also argued that the US administration has limited room to allow the AI investment cycle to weaken because of its growing importance to the broader economy.
In a recent Substack discussion, Burry said the AI narrative and infrastructure buildout had become a major source of economic momentum in the US.
He questioned what policymakers in Washington could do if the AI trade began to unwind.
Burry has previously maintained bearish positions against AI-linked companies while warning that elevated valuations and aggressive investment could eventually create conditions for a sharp correction.
AI Risks Add To Investor Concerns
The debate comes as investors and technology executives increasingly focus on the risks associated with the rapid development of artificial intelligence.
Anthropic CEO Dario Amodei recently called for AI companies to slow the pace of advances in model capabilities, citing concerns about potential misuse and the growing capabilities of AI agents.
His comments added to a wider discussion around the economic and societal risks accompanying the rapid expansion of AI.
Burry Sees Risk Of A 1987-Style Market Shock
Burry has also warned that the broader US stock market could be approaching a major peak. He has compared the current environment with periods of extreme market optimism and said a sharp correction similar to the 1987 crash cannot be ruled out.
The Dow Jones Industrial Average plunged about 23% on October 19, 1987, in one of the most severe single-day declines in Wall Street history. The crash eventually contributed to the introduction of market-wide circuit breakers.
Burry has separately drawn parallels between current market conditions and the dot-com era, pointing to heavy venture-capital investment, rising debt linked to AI infrastructure and elevated investor optimism.
His bearish outlook has attracted significant attention because of his successful bet against the US housing market, which was later portrayed in the 2015 film The Big Short, starring Christian Bale, Steve Carell and Ryan Gosling.
For now, the AI trade remains a key driver of US equity markets, leaving investors focused on whether the enormous capital being deployed into AI infrastructure can translate into revenues and profits at a pace that supports current valuations.
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