Like it or not, 2025 has been the year artificial intelligence took over the world. Just about every business on the planet has been scrambling to leverage AI in every way possible, leading to an influx of new AI-powered apps, services, and agents. 

The floodgates have been opened, and it’s now impossible for any of us to avoid AI. It’s absolutely everywhere, and industry leaders have invested huge money in cloud infrastructure to support it.

But there’s a growing chorus of investors who’re concerned that this up-and-coming AI vertical has risen too far, too fast. In fact, more than a few big names have issued warnings we could be looking at a speculative bubble that’s about to go “pop.”

None of those voices are louder than Michael Burry, the all-star hedge fund manager who famously predicted the great financial crisis of 2008. Burry recently took to social media arguing that foundational cloud revenue growth is grinding to a halt, which doesn’t look great stacked alongside the current pace of AI capex growth.

As always, there’s a bit more to it than that. But Burry definitely has a point. Let’s take a closer look:

What Did Michael Burry Say About Cloud Growth? What Are His Data Points?

At the start of November, Burry broke a fairly long silence on X with a bearish statement on the AI boom. At first glance, you could argue it was just a cryptic Star Wars reference with a few very specific charts. But take a closer look, and his warning is clear: 

AI is all hype, and the fundamentals supporting this year’s boom are starting to show cracks.

First, there’s the issue of cloud revenue.

Burry shared a chart that shows a definitive year-over-year slowdown at all of the big three cloud providers: AWS, Microsoft, and Google. He cites that the data was taken from each company’s annual filings, and the slowdown suggests something of a paradox.

For instance, his chart shows that from 2018 to 2022, AWS had average annual cloud revenue growth of 36%. From 2023 through 2025, that slowed to average annual growth of 17%. Google is the same story, with average annual growth of 45% from 2018-2022, slowing to 29% from 2023-2025. 

This huge AI revolution has only been made possible because of the vast, scalable infrastructure these companies are able to offer. But if cloud consumption is slowing, that means the massive capital expenditure that’s being poured into AI could be based on unrealistic or ‌ delayed revenue expectations.

In other words: We’re looking at a dangerous oversupply.

But Burry didn’t stop there. He then posted two more charts.

One was a nightmare graph charting the burst of the infamous dot-com bubble, and it doesn’t take a rockstar analyst to spot the similarities. In the late 1990s, telecom and internet companies wasted billions building infrastructure to support unrealized demand. That led to a painful correction that sent huge companies into Chapter 11.

And finally, Burry drew his followers’ attention to a Bloomberg chart trying to illustrate how OpenAI and Nvidia (NVDA) fund their growth. 

From the outside looking in, it certainly looks like a case of circular financing in which these AI leaders are both customers and investors in one another. The concern here is that AI companies are artificially inflating demand, which is more or less what happened when banks started to go bust in 2008.

Combine these elements of oversupply and artificial demand, and it’s easy to see where Michael Burry stands on the AI boom. 

But he doesn’t just talk the talk. Burry is definitely walking the walk.

Why Is Burry Betting Against AI Stocks?

Burry’s now-deregisted fund’s latest 13F filing revealed that he was actively betting on the collapse of this so-called AI bubble. 

Scion Asset Management bought almost $200 million in put options against Nvidia, the AI boom’s undisputed king, in the third quarter. During the same period, Scion grabbed another $900 million in put options against Palantir (PLTR).

Both of these AI companies have seen their stock prices soar in recent months, leading to huge valuations. But Burry’s position seems to tell us that these dominating valuations can’t be justified if broader AI spending doesn’t get very profitable very quickly.

Right now, it doesn’t look like AI sales can pick up fast enough to meet market expectations, and so it does look like a pretty shrewd bet.

It’s important to recognize this isn’t a billion dollar bet that AI is a bad idea. There’s long-term potential, and this seems to be the way tech is headed. Burry’s Q3 moves were positioning for when these stock prices correct. 

Is There a Bubble Brewing in the AI Trade? If So, What Should You Do Next?

Nobody’s got a crystal ball (not even Michael Burry). But there has been a market reaction to Burry’s bet. He’s made the clear case for a bubble, and there’s consequently been a noticeable selloff in AI-related stocks over the past week.

So, what are investors supposed to do?

Burry’s advice is simple: “Sometimes, the only winning move is not to play.” That means you shouldn’t freak out and panic sell. Instead, investors should be taking a defensive posture to insulate themselves in case the bubble does pop.

In practice, that means reevaluating your risk exposure. It’s important to diversify against disproportionate AI holdings. And if you’re looking for ways to broaden out your portfolio, you should be looking for companies that are showing signs of accelerating profitability.

Finally, it’s worth holding a decent cash position that’ll let you capitalize on any pullbacks. Assuming Michael Burry is right, the market could be on course for some sharp corrections. That’ll mean great buying opportunities to load up on companies that do genuinely have long-term value (even if their prices have become detached from that value).

You never know. There is a chance that cloud growth and capex will naturally rebalance, and the bubble won’t pop anytime soon. But at the end of the day, Michael Burry definitely has a reputation for making good calls. However you choose to play this one, make sure you tread with caution. 

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