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Investor skepticism and bubble warnings on AI

Updated 13 times since CLSTR started tracking revisions of this situation.

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2026-09-11 17:25 UTC → 2026-09-11 22:33 UTC · added ~~removed~~

Since early July 2026, fund manager Michael Burry has warned that rapid AI-related investment expansion may be forming a bubble. Burry has taken short positions in Nvidia, Micron, Oracle, Tesla, Palantir, and Applied Materials, specifically targeting Nebius. He criticized Nebius for changing its server depreciation schedule to improve reported profits, though his timing faced pressure when Nebius reported second-quarter revenues rising 454% to $582 million, causing shares to surge 34%. By mid-August, warnings of market instability intensified. Bank of America noted that market euphoria is reaching extreme levels, with its Bull & Bear Indicator nearing maximums not seen since 2021. Financial analyst Ed Dowd characterized the AI market as the ‘greatest bubble of all time,’ comparing it to the dot-com era and predicting a potential correction of 40% to 50% due to high capital costs and insufficient power supplies. Former Goldman Sachs CEO Lloyd Blankfein also raised concerns regarding risk concentration within the AI trade. In late August, Bridgewater Associates founder Ray Dalio warned that current stock valuations mirror the speculative excesses seen before the 1929 and 2000 market crashes, noting a cyclically adjusted price-to-earnings (CAPE) ratio of approximately 41. Burry has since expanded his short positions against Nvidia, Oracle, Palantir, Nebius, and Caterpillar. Regarding Nvidia, Burry expressed skepticism that the company can maintain extreme margins and a near-monopoly indefinitely. Despite Nvidia reporting a 106% year-over-year revenue increase to $96.2 billion in its recent quarterly results, Burry maintained his bearish stance through short positions. Concerns have also emerged regarding whether chip demand is being artificially supported by complex financing structures, such as residual value guarantees provided by Nvidia to facilitate data center projects. Federal Reserve officials have joined the scrutiny. San Francisco Fed President Mary Daly and Kansas City Fed’s Jeff Schmidt have raised questions about the sustainability of data center investments, with Schmidt questioning if the sector is becoming ‘too big to fail.’

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