Michael Burry argues that OpenAI and Anthropic want to join Big Tech's oligopoly, but warns that much AI spending may become a sunk cost.
The investor who predicted the 2008 housing collapse, Michael Burry, is doubling down on his bearish view of the AI infrastructure boom. He warns that much of the billions being poured into data centers and computing capacity could ultimately become "sunk cost."
In his latest Substack post, published Wednesday, Burry argued that "compression" will eventually make some of today's massive AI investments uneconomical.
"Ultimately, compression will do its deed, and much of what is being spent will be just so much sunk cost," Burry wrote.
He did not elaborate on what he means by "compression." In a previous post, he described it as "what happens when the benchmark phase ends and companies start to reduce third party token overuse."
The comments come as AI companies and hyperscalers continue to commit hundreds of billions of dollars to AI development, GPUs, data centers, and other infrastructure. In the post, Burry broadly argued that the market could be heading for a sizable correction in the coming months.
**OpenAI and Anthropic Want Into the AI Oligopoly**
Burry said OpenAI and Anthropic want to "expand a monopoly" and join the ranks of Microsoft, Amazon, Google, and Meta Platforms, but warned that their ambitions may not ultimately materialize.
"They intend to be part of the oligopoly. None can imagine breaking the dominance of a Microsoft, Amazon, Google, or Meta within each silo," he said.
"I give these companies (OpenAI and Anthropic) less credit than all that. I grant them the craven desire to expand a monopoly, to join an oligopoly. But this is a want, not a need, and human thought is far too redundant for what is being built."
Hyperscaler capital spending is expected to approach $800 billion in 2026 and could top $1 trillion in 2027. That spending has created a powerful multiplier effect for semiconductor and networking companies, boosting their financials and stocks.
**Burry Questions the AI Infrastructure Boom**
Burry has been a prominent critic of the AI infrastructure boom and the surge in valuations of chipmakers and AI labs that followed.
In a recent comment, he said the stock market is repeating patterns seen before the 2000 dot-com bust and the 2008 financial crisis, with investors still in the "denial" phase despite historically high valuations.
He said the "AI boom" would eventually turn into a bust, and that he has moved up his bearish timelines and positioning for a "2000-2003 style value revival" as the AI trade unwinds.
Burry currently holds bearish positions in Nvidia, Palantir, Oracle, Micron, Nebius, the iShares Semiconductor ETF, and the Nasdaq 100.
**Tech Market Recovers**
As OpenAI and Anthropic reportedly move toward their initial public offerings (IPOs), investor sentiment toward the public tech sector appears to be improving. Nvidia Corp. (NVDA), the bellwether of the AI industry, hit a record high on Tuesday, extending the momentum of the past 30 days after months of choppy trading. The Invesco QQQ Trust Series 1 (QQQ) has gained more than 5% over the past month.
On Stocktwits, retail sentiment was "neutral" for OpenAI, Anthropic, NVDA, and MSFT, and "bullish" for AMZN and GOOGL on Thursday.