Is the AI Boom a Bubble? Here’s What Michael Burry Sees That Most Investors Don’t
Everyone wants to know whether AI stocks will keep exploding—or whether we’re quietly heading toward the next big bubble. And when someone like Michael Burry speaks up, people pay attention. Burry is the same guy who called the 2008 housing market collapse long before anybody believed him. Now he’s placing a billion-dollar bet against Nvidia and Palantir. When someone with that track record puts real money behind a warning, I take the time to dig deeper and you should too.
Burry’s concern is simple: the financial behavior surrounding AI stocks looks a whole lot like what we saw during the dotcom bubble. He’s looking at the velocity of investment, the circular money flow between AI companies, and the widening gap between valuations and actual revenue. And honestly? He’s not wrong that the numbers are getting extreme.
AI corporate investment is projected to jump from $103 billion in 2019 to $252 billion in 2024. That’s a 2.5x increase in just five years. At the same time, the average P/E ratio on the NASDAQ is about 35 higher than the long-term average of 20. It’s nowhere near the dotcom insanity of 120 times earnings, but the market is still priced for perfection. And the concentration is getting wild: the Magnificent 7 now make up roughly 34% of the entire S&P 500. That is historic, and it means if those companies stumble, everyone feels it.
But here’s where things are very different from the early 2000s. Back then, the Fed was tightening money. Interest rates were rising, liquidity was drying up, and over-leveraged tech companies had nothing to fall back on. Today? The Fed is loosening again cutting rates and easing quantitative tightening. Companies aren’t running on borrowed money. They’re running on giant piles of cash they’ve hoarded for a decade. Apple, Google, Amazon all of them repatriated offshore cash after the 2017 tax changes, and they’ve been waiting for the next big opportunity. AI became that opportunity. So instead of borrowing money to fuel risky bets, they’re spending money they already have.
That’s why the AI boom has been so resilient. Rising rates didn’t kill it. Slower cloud revenue didn’t kill it. Antitrust lawsuits haven’t killed it. So if this is a bubble and I do think parts of it are inflated it’s operating under completely different rules than past crashes.
Now, that doesn’t mean the risks aren’t real. Companies are promising investors the moon, and if they can’t deliver, valuations could collapse fast. Goldman Sachs is already warning of potential overinvestment. Morningstar is warning of valuation fatigue. And the job market? That’s a whole other problem. AI is eliminating traditional entry-level jobs faster than companies are creating new ones. That means fewer opportunities for people to enter the workforce, build skills, and start the wealth-building process. When job creation slows, consumer spending slows. And when consumer spending slows, corporate revenue slows. So yes, if earnings disappoint, the AI trade can fall apart quickly.
But here’s the part most people are missing: every major technological revolution creates a wave of millionaires the people who learn the new skills, adapt early, and position themselves for the future. AI is eliminating jobs, but it’s also creating opportunities. You just have to choose which side of the shift you want to be on.
So is this an AI bubble? Maybe. Are AI stocks overvalued? Absolutely some of them. Are there risks? Without a doubt. But do I think AI is going away? Not a chance. You just have to understand the game you’re playing.
Jaspreet Singh is not a licensed financial advisor. He is a licensed attorney, but he is not providing you with legal advice in this article. This article, the topics discussed, and ideas presented are Jaspreet’s opinions and presented for entertainment purposes only. The information presented should not be construed as financial or legal advice. Always do your own due diligence.
