Michael Burry Warns AI May Collapse Big Tech Profits Now

UPDATE: In a shocking revelation, renowned investor Michael Burry, famed for his role in “The Big Short,” has issued a stark warning about the future of Big Tech, highlighting that the rise of AI could severely impact profit margins across the industry.

Burry, in a recent post on Substack, stated that the era of high returns on invested capital (ROIC) for tech giants like Microsoft, Google, and Meta is coming to an end. He argues that AI is forcing these companies to shift away from their traditionally asset-light business models to more capital-intensive operations.

“The measure to beat all measures is return on invested capital (ROIC),” Burry emphasized. “Now that they are becoming capital-intensive hardware companies, ROIC is sure to fall, and this will pressure shares in the long run.”

Burry’s analysis comes at a critical time as the tech sector grapples with escalating costs related to AI infrastructure, including data centers and specialized chips. Despite heavy investments, these companies have yet to demonstrate significant profitability from their AI initiatives, raising alarms about a potential bubble.

He notably compared the current AI surge to the dot-com bubble of the late 1990s, referring to OpenAI as “the Netscape of our time.” As history has shown, the bursting of the dot-com bubble resulted in devastating losses for investors.

Burry’s firm, Scion Asset Management, has made substantial bets against leading AI firms, including Nvidia and Palantir Technologies. His latest comments suggest that the ongoing spending spree on AI development may lead to widespread bankruptcies in the sector, with many investors left holding the bag.

“At some point, this spending on the AI buildout has to have a return on investment higher than the cost of that investment, or there is just no economic value added,” Burry wrote, indicating a looming financial crisis within the tech industry.

As companies like OpenAI, Anthropic, Google, and Meta heavily invest in AI technologies, the stakes are high. They are prepared to spend billions, yet the significant returns remain elusive, prompting Burry to warn of potential panic in the market as early as 2026.

Investors and tech enthusiasts are urged to pay close attention to these developments, as declining ROIC could reshape the landscape of Big Tech for years to come. With Burry’s alarming predictions, the urgency for stakeholders to reassess their strategies has never been more critical.

This situation is rapidly evolving, and the implications for both the tech industry and global markets could be profound. Stay tuned for further updates as this story develops.