Michael Burry Warns of Imminent AI Bubble Burst

Michael Burry, the investor who gained renown for his prescient bet against the U.S. housing market preceding the 2008 financial crisis, is intensifying his warnings about the artificial intelligence sector, predicting a potential bubble burst "sooner than later." Burry has adjusted his short positions in several AI-related stocks, including memory chip firm Micron, cloud-computing company Nebius, AI data analysis giant Palantir, and the iShares Semiconductor ETF (SOXX).

While citing tax reasons for some adjustments, Burry indicated that these moves primarily reflect his growing conviction that the AI boom could unravel imminently, with potential significant market movements by next summer. These companies are deeply integrated into the AI business, making them central to his bearish outlook.

Burry's concerns arrive as AI company Anthropic, the creator of the Claude chatbot, prepares for a potential initial public offering (IPO) that could value it at over $2 trillion. Anthropic's IPO prospectus reveals substantial financial activity within the AI industry, with the company reporting a net loss of nearly $42 billion in 2025. A significant portion of this loss, approximately $34 billion, stemmed from accounting charges related to financing that could convert to shares. The company's operating loss also widened to $8.06 billion in 2025 from $2.98 billion the previous year, although revenue surged more than twelvefold to nearly $4.6 billion.

Anthropic's expenditures on computing and infrastructure were substantial, reaching $7.33 billion in 2025, a threefold increase from the prior year. Looking ahead, the company anticipates committing around $518 billion to cloud, computing, and infrastructure obligations. The prospectus dedicates a considerable portion, nearly a third of its 261 pages, to detailing various risk factors.

Susannah Streeter, chief investment strategist at Wealth Club, noted that Anthropic's substantial losses and projected future spending raise questions for investors about the economic viability of frontier AI. "Anthropic is still making massive losses and forecasts extraordinary levels of spending needed in the future, to the tune of $518 billion to stay at the crest of the wave," she commented, adding that this could undermine investor confidence in whether the economics of frontier AI can justify the scale of investment required.

Anthropic's filing suggests AI could revolutionize the global economy on a scale comparable to industrialization, electricity, and the internet. The company has demonstrated significant growth, with annualized revenue reportedly exceeding $65 billion by late July. However, nearly a quarter of last year's revenue came from just two clients, and many major customers are not bound by long-term contracts, posing a risk of reduced or ceased spending. Furthermore, Anthropic faces strong competition from OpenAI, which holds a larger share of tracked enterprise AI spending.

The company's IPO filing also highlights concerns about existential risks posed by advanced AI. Former Anthropic researcher Jacob Coxon recently resigned and issued a warning about the rapid pace of AI development, suggesting that companies are moving too quickly towards increasingly powerful systems. Coxon expressed fears that AI could pose an existential threat to humanity, particularly as systems become more autonomous and potentially act beyond human control. This aligns with warnings from Anthropic CEO Dario Amodei himself, who has called for the industry to slow down the development of highly advanced AI models.

Streeter described the situation as a "massive contradiction," with Anthropic warning of AI dangers while seeking investor capital for its expansion. Despite these concerns, the IPO could trigger a "fear of missing out" among investors eager to participate in the AI race. The listing is now anticipated to occur after the U.S. midterm elections in November.

Burry has consistently expressed skepticism about the soaring valuations in the AI stock market. While his past successes do not guarantee future accuracy, he has a history of challenging popular investment narratives when he believes market prices have become detached from fundamental realities. Investors are currently evaluating Anthropic's extraordinary revenue growth and potential valuation against its significant losses, substantial future spending commitments, and uncertainty regarding the translation of growth into sustainable profits.