Michael Burry Sounds a Warning on Artificial Intelligence

Michael Burry, the investor who predicted the 2008 subprime mortgage crisis, has opened large bearish positions, through put options, on Nvidia and Palantir, two stocks that symbolise the artificial intelligence race. According to Burry, the AI wave risks being inflated by questionable accounting, with overly long depreciation periods and artificially inflated profits.

In this article I explain what Burry did, why his reasoning matters even if you do not invest in the stock market, and how I bring artificial intelligence into a business with measurable, sustainable goals, away from the hype.

What Michael Burry did on Nvidia and Palantir

Burry became famous for predicting the 2008 subprime mortgage crisis. He is now issuing a warning about AI: through his firm Scion Asset Management he bought put options on Nvidia and Palantir.

According to analyses, the put position on Nvidia is equivalent to one million shares, with an estimated notional value in the hundreds of millions of dollars. On Palantir the bearish bet is even larger: put options equivalent to millions of shares, for a notional value of almost one billion dollars.

With these positions Burry expresses deep scepticism about the current narrative around artificial intelligence. His alarm concerns the business models of many tech companies: in his view, the accounting of many AI companies rests on unrealistic foundations.

Why Burry criticises the depreciation of AI hardware

Burry challenges the way many large tech companies handle the costs of AI hardware, in particular depreciation cycles that are too long for GPUs, servers and data centre infrastructure.

Many companies state that their GPUs last five or six years. According to Burry, their useful life in practice may be much shorter, perhaps two or three years. Extending the accounting life of the components spreads their cost over more periods. Balance sheets then look stronger, earnings per share are inflated and profitability looks better than it really is.

For Burry, this accounting choice is one of the most common levers used to mislead the market. In a social media post he called it “one of the most common frauds of the modern era”. If his analysis is correct, over the coming years the cumulative overstatement of profits could reach hundreds of billions of dollars.

Why Burry closed Scion to outside capital

Burry has also decided to deregister his management company, Scion Asset Management. He will no longer manage outside capital as a hedge fund and may become a private family office, focused on his own wealth and with more direct control over his investments.

He has said he remains active in the markets. For many observers it is a strategic move: with no institutional investors to answer to, he stays free to make unconventional bets.

What Burry's move teaches anyone running a business

The story seems to concern only high-risk finance. In fact it also matters to businesses, managers and entrepreneurs, for four reasons.

Saying “AI” does not create value

Not every company using the word AI is creating real value. Many call themselves “AI-driven” to ride a trend, with no solid strategy behind it.

The risk of creative accounting

If an experienced investor like Burry believes that many companies use overly optimistic depreciation, it is worth asking whether your own business is really thinking long term or just presenting good-looking accounts.

Value has to be tangible

Instead of chasing promises of explosive growth, it pays to invest where AI has a concrete impact: more efficient processes, better decisions, lower costs, a better customer experience.

Strategy first, then technology

Burry's example is an invitation to develop a realistic and sustainable plan instead of blindly following the artificial intelligence trend.

How I bring AI into a business with measurable results

AI delivers value when it is part of a solid strategy. My work follows five steps.

1. A realistic analysis of business needs

Before using AI I work out where it can have a significant impact. With my clients I map processes, inefficiencies, automation opportunities and the areas where AI can truly make a difference.

2. Technical assessment and data readiness

Not every business is ready for advanced artificial intelligence. I assess the state of the data: quality, volume, structure and governance. I analyse the technology infrastructure and check whether it needs strengthening before starting machine learning projects.

3. Tailored design

I design concrete AI solutions: predictive models, recommendation systems, conversational agents, automations. The approach is modular: you can start with a Proof of Concept (PoC) to test an idea and then extend the system one step at a time.

4. Measuring value

Together with my clients I define measurable key performance indicators (KPIs), such as lower operating costs, decision quality, time saved, errors avoided and higher sales. Then I monitor the results and report on them clearly.

5. Governance, ethics and training

Adopting artificial intelligence also involves technical, ethical and operational risks. I train the team on how to use AI responsibly, manage models over time, mitigate bias and make the results transparent.

What anyone bringing AI into a business can take from this

Michael Burry's bet against Nvidia and Palantir is a warning about the illusion of artificial intelligence. When an investor known for his clear-sightedness bets against the two stocks that symbolise AI, the subject deserves attention.

For a business, saying “we use AI” achieves little without a concrete strategy, solid data, a tailored project and a long-term vision.

If you want to find out where AI can deliver measurable results in your business, write to me: we start from the processes and the numbers.