AI Stocks Plunge as Investor Michael Burry Bets on a Bubble

Picture Credit: Reuters

After months of relentless optimism around artificial intelligence, global markets faced a sharp reality check this week. Major tech stocks tumbled, wiping out nearly $730 billion in market value in a single day, a sign that investors may be rethinking the AI frenzy.

The Nasdaq dropped more than 2%, while Nvidia fell nearly 4% and Palantir plunged close to 8%. Even Reddit and Amazon were caught in the downturn. In Asia, the selloff continued with Japan’s Nikkei slid 2.5%, SoftBank tumbled 10%, erasing around $23 billion, and Taiwan’s TSMC dipped almost 3%.

The sudden market shock was triggered by Michael Burry, the famed investor who famously shorted the U.S. housing market before the 2008 financial crisis, a story immortalized in The Big Short. Burry’s hedge fund has now placed a $1.1 billion bet against AI-related stocks, particularly targeting Nvidia and Palantir.

Burry’s move comes amid growing debate over whether the AI boom has turned into a speculative bubble. While AI giants like Nvidia, Palantir, and Amazon continue to post massive revenue, with Nvidia recently hitting a $5 trillion valuation, analysts warn that sky-high valuations may be outpacing actual profits.

The situation has drawn comparisons to the dot-com bubble of the early 2000s, when investors poured billions into overhyped internet companies before markets collapsed. Still, unlike that era, today’s AI firms generate real profits and power critical industries.

For now, the sell-off seems more psychological than structural, a reminder that even in an age of machine intelligence, markets remain driven by human emotion. The AI revolution isn’t over, but the era of blind optimism may be nearing its end.