According to Gizmodo, Michael Burry’s Scion Asset Management disclosed put options against Nvidia and an even larger position against Palantir in September 30 regulatory filings released Monday. Both companies are considered AI darlings, with Nvidia becoming the only company worth over $5 trillion and Palantir’s stock up 150% this year. Burry posted cryptic warnings on X, including charts showing declining cloud growth at Amazon, Alphabet and Microsoft between 2023-2025 versus 2018-2022. He also highlighted that U.S. tech capex growth is matching the 1999-2000 tech bubble and posted about circular dealmaking among AI companies with Nvidia at the center. Palantir CEO Alex Karp responded by calling Burry’s behavior “egregious” and said he’d “be dancing around when it’s proven wrong.”
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The Ghost of Bubbles Past
Burry isn’t just making random bets here. He’s essentially saying we’ve seen this movie before, and he should know – he starred in the last one. The parallels to the dot-com bubble are honestly striking. Every earnings call now features companies desperately mentioning “AI” to please investors, exactly like how every company in 1999 slapped “.com” on their name. And here’s the thing: Apollo Global Management’s chief economist recently noted that today’s top S&P 500 companies are actually more overvalued than they were in the 1990s bubble.
But the most chilling part might be Burry’s reference to the telecom crash that followed the dot-com bust. He highlighted how by 2002, less than 5% of U.S. telecom capacity was actually being used. Thousands of miles of expensive fiber optic networks just sat there unused. Sound familiar? We’re building AI infrastructure at breakneck speed, but what if the demand doesn’t materialize as quickly as everyone hopes?
The AI Circle Jerk
Burry’s post about circular dealmaking really hits home. Look at what’s happening: Nvidia invests in companies that then buy more Nvidia chips. Microsoft partners with OpenAI while also competing in some areas. It’s becoming this incestuous web where everyone’s investing in each other and propping up valuations. Basically, the AI industry is starting to look like a giant Ponzi scheme where the same money keeps circulating among the same players.
And the scary part? This isn’t just about stock prices anymore. These circular investments are propping up not just the tech sector but the entire U.S. economy. If one major player stumbles – if demand doesn’t materialize or breakthroughs slow down – we could see a domino effect that takes the whole system down. The Fed researchers warned about this earlier this year, comparing it to the railroad over-expansion of the 1800s that led to an economic depression.
But Here’s the Reality Check
Now, let’s be fair – the internet skeptics of 2000 weren’t completely wrong about the technology, they were just wrong about the timing. The internet did transform society, and all that fiber optic capacity eventually got used. The question isn’t whether AI is transformative technology – it clearly is. The question is whether current valuations reflect realistic timelines and actual business models.
Burry’s bet essentially says we’re building infrastructure way too fast for demand that might take years to materialize. His regulatory filings and cryptic X posts suggest he thinks the hype has wildly outpaced reality. And honestly? Given how every company from toothpaste manufacturers to car companies suddenly has an “AI strategy,” it’s hard to argue there isn’t at least some froth in the market.
The real test will be whether AI can deliver real, sustainable profits rather than just promising them. Because if history teaches us anything, it’s that bubbles always look perfectly rational until they don’t.
