BREAKING: Renowned investor Michael Burry, famous for predicting the 2008 financial crisis, has issued a stark warning about the impact of artificial intelligence (AI) on major tech companies. In a recent Substack post, Burry claims that the AI revolution is driving Big Tech away from its historically profitable, asset-light business model, signaling a troubling decline in returns on invested capital (ROIC).
Burry’s analysis comes amid growing concerns about the sustainability of the AI boom, as companies like Microsoft, Google, and Meta transition to more capital-intensive operations. He predicts that this shift will lead to a significant drop in ROIC, a critical metric for investors assessing company profitability.
“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.” This stark assessment holds immediate relevance for investors and stakeholders in the tech industry as it could reshape market dynamics.
Burry’s hedge fund, Scion Asset Management, has already made substantial bets against tech firms like Nvidia and Palantir Technologies, both recognized leaders in the AI sector. He compares the current AI hype to the late-1990s dot-com bubble, asserting that the infrastructure investments being made by AI companies could lead to a similar burst. “OpenAI is the Netscape of our time,” he stated, referencing the internet’s initial boom and subsequent crash.
As AI firms continue to expand, the financial landscape remains uncertain. Leading companies are pouring vast resources into developing energy- and data-intensive applications, but Burry warns that these investments have yet to yield significant profit returns. “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,” he cautioned.
The urgency of Burry’s message cannot be understated. Investors may need to reconsider their positions in AI companies as signs of a potential bubble emerge. With debt and equity investors backing these expansive projects, the pressure is mounting for AI firms to demonstrate profitability before a market correction occurs.
As the tech world watches closely, Burry’s predictions serve as a critical reminder of the volatile nature of investment in emerging technologies. The implications of falling ROIC could affect stock prices and investor confidence for years to come. Will 2026 mark the beginning of a significant downturn for AI investments? Only time will tell as developments unfold rapidly in this high-stakes arena.
For those involved in the tech industry or invested in these companies, staying informed is crucial. Burry’s insights are a call to action for investors to reassess their strategies in light of these alarming projections.
As we monitor this evolving situation, the conversation around the sustainability of the AI boom and its long-term impacts on Big Tech will continue to grow. Stay tuned for further updates as this story develops.
