Michael Burry Warns AI Boom Could Crush Big Tech Profits

URGENT UPDATE: Renowned investor Michael Burry has issued a stark warning that the rise of artificial intelligence (AI) may spell disaster for Big Tech companies. In a newly released Substack post, Burry asserts that the shift toward AI is driving down returns on invested capital (ROIC) for industry giants such as Microsoft, Google, and Meta.

Burry, famous for predicting the 2008 financial crisis in “The Big Short,” emphasizes that the key metric investors should monitor is not revenue growth or market size, but ROIC. He stated, “The measure to beat all measures is return on invested capital (ROIC). Now that they are becoming capital-intensive hardware companies, ROIC is sure to fall, and this will pressure shares in the long run.”

The implications are significant. As AI companies pivot from asset-light software models to capital-intensive operations involving costly data centers and energy consumption, Burry warns that this shift could lead to an enduring decline in stock prices. Despite AI potentially expanding the market, the expected fall in ROIC could leave investors in a precarious position for years.

Burry’s hedge fund, Scion Asset Management, has already made substantial bets against AI heavyweights like Nvidia and Palantir Technologies, reflecting growing skepticism about the profitability of the AI boom. He has compared the current AI surge to the late-1990s dot-com bubble, stating that OpenAI represents the “Netscape of our time,” referencing how Netscape’s IPO marked the start of the dot-com hype that ultimately collapsed.

Additionally, in his Substack post dated January 12, 2026, Burry warned that “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.” His comments resonate amid growing concerns that many AI companies may not achieve significant profit returns, leading to potential bankruptcies and massive write-offs.

Investors are paying close attention as leading AI firms, including OpenAI, Anthropic, and others, ramp up spending to develop the infrastructure needed for their energy-intensive AI applications. However, the lack of substantial profit returns is raising alarms among analysts, including Burry, who fear an impending bubble burst.

As the AI landscape evolves, the stakes are higher than ever. Investors are urged to stay vigilant and monitor these developments closely, as Burry’s insights could foreshadow a critical turning point for the tech industry.

With Burry’s warnings echoing through financial circles, the question remains: will the AI boom lead to a repeat of the dot-com fallout? The next few years will be crucial in determining the future of Big Tech as it navigates this tumultuous new terrain.