'Big Short' investor Michael Burry says AI is turning Big Tech into a worse business

• 'Big Short' capitalist Michael Burry has stake against the AI boom.

• Burry said successful a caller Substack station that returns connected invested superior successful Big Tech are declining.

• He said that's due to the fact that AI is pushing Big Tech distant from its asset-light concern models.

Michael Burry, the capitalist made celebrated by "The Big Short," says the epoch of Big Tech turning comparatively tiny investments into immense profits is ending.

And helium says AI is to blame.

In a caller Substack speech with tech podcaster Dwarkesh Patel, Burry said the astir important metric AI manufacture investors should beryllium watching isn't gross growth, hiring, oregon adjacent marketplace size, but instrumentality connected invested capital, oregon ROIC.

ROIC is simply a measurement of however efficiently a institution turns the wealth it puts into its concern into profit.

"The measurement to bushed each measures is instrumentality connected invested superior (ROIC), and ROIC was precise precocious astatine these bundle companies. Now that they are becoming capital-intensive hardware companies, ROIC is definite to fall, and this volition unit shares successful the agelong run," Burry wrote.

AI, Burry said, is pushing companies similar Microsoft, Google, and Meta distant from their historically asset-light bundle models and toward a acold much capital-intensive aboriginal defined by information centers, chips, and energy.

Even if AI expands Big Tech's addressable market, helium said, falling ROIC could unit banal prices for years to come.

Burry roseate to fame aft his stake against the mid-2000s lodging roar was chronicled successful "The Big Short." Outside the occasional cryptic societal media post, Burry, for a agelong time, spoke publically lone rarely.

That changed precocious past twelvemonth erstwhile helium closed his hedge money to extracurricular currency and began penning fiscal investigation connected Substack.

Perhaps astir notably, helium has precocious compared the AI roar to the late-1990s dot-com bubble, calling OpenAI the "Netscape of our time." Netscape's IPO marked the opening of dot-com hype successful 1995. Five years later, the bubble burst.

Burry's hedge fund, Scion Asset Management, has made ample bets against Nvidia and Palantir Technologies, 2 darlings of the AI era, according to a regulatory filing released successful September past year.

Leading AI companies, similar OpenAI, Anthropic, Google, and Meta, are spending large to physique retired the infrastructure they request to enactment their energy- and data-intensive chatbots and different AI applications. Debt and equity investors person lined up to backmost these projects.

So far, however, those companies person not shown important nett returns connected their AI products, starring investors similar Burry to dependable the alarm that AI is simply a bubble connected the verge of bursting.