Michael Burry's Bold Bet: Why the Hedge-Fund Guru Is Shorting the AI Boom

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  Published in Stocks and Investing on Saturday, November 22nd 2025 at 7:30 GMT by The Motley Fool
      Locale: UNITED STATES

Michael Burry’s Bold Bet: Why the Hedge‑Fund Guru Is Shorting the AI Boom

When Michael Burry first broke into the headlines in 2008 as the man who foresaw the collapse of the U.S. sub‑prime mortgage market, he did it on a quiet, data‑driven basis. His 2011 short of American International Group (AIG) and his 2021 bet against the stock‑market rally that followed the COVID‑19 pandemic were both rooted in a rigorous, fundamentals‑first approach. In a surprising turn, Burry’s most recent public signal is a bet against artificial intelligence (AI) and the entire tech bubble that has been inflating over the last few years.

The short, which was revealed in a Motley Fool note released on November 22, 2025, was not a blanket sell‑off of all technology. Rather, it was a targeted short of several AI‑related exchange‑traded funds (ETFs) and the high‑growth AI stocks that have been the darling of the market. The move was announced in the context of a broader, well‑documented concern that AI hype is outpacing fundamentals—something Burry has repeatedly highlighted in past commentaries.

The AI Over‑Valuation Narrative

Burry’s rationale is anchored in three pillars: valuation, regulatory risk, and the “AI bubble” thesis.

1. Valuation: The AI‑sector’s valuations have ballooned since the introduction of generative AI tools such as ChatGPT. According to a research note Burry cited in his Fool article, the average price‑to‑earnings ratio for the AI sector (using the S&P AI Index) is now roughly 50x the long‑term average for the broader market. Burry argues that such a premium is unsustainable, especially given that most AI companies have yet to hit consistent profitability.

2. Regulatory risk: Burry is quick to point out that governments are increasingly scrutinizing AI. He referenced an April 2024 EU regulation that mandates “explainable AI” and imposes hefty fines for algorithmic bias. The U.S. also has proposed legislation that would impose a “data privacy tax” on tech firms that rely on large datasets—an industry standard for many AI providers. The article links to a recent New York Times piece that details these regulatory threats.

3. AI bubble thesis: Burry believes the sector is riding a speculative wave fueled by hype and “unrealistic expectations.” He cited a Wall Street Journal analysis that described the current wave as a “new era of speculative mania.” By shorting AI ETFs, he is effectively betting that the bubble will burst— or at least that the over‑valuation will be corrected.

Mechanics of the Bet

Burry’s short isn’t a simple “short sell” of the Global X Robotics & Artificial Intelligence ETF (BOTZ). Instead, the article explains that he entered a short put spread on the iShares Robotics and AI Multisector ETF (IRBO), selling high‑strike puts and buying lower‑strike puts to hedge some downside risk. The net position is bearish: he expects the price of these AI ETFs to fall in the medium‑term (12–18 months) as valuation rebalancing occurs.

Burry also disclosed a long position in data‑center infrastructure companies that support AI workloads. By purchasing shares in firms such as Equinix (EQIX) and Digital Realty (DLR), he positions himself to benefit from the continued need for physical infrastructure—even if the AI companies themselves see a pullback. The Motley Fool note cites a Bloomberg article that estimates data‑center capacity will grow by 7% annually through 2030, reinforcing Burry’s bet on infrastructure resilience.

Historical Context and Comparisons

The article offers a rich historical lens. Burry’s 2021 short against the post‑COVID rally is highlighted as a parallel. In 2021, he had been shorting technology stocks like Tesla (TSLA) and Amazon (AMZN) before the rally corrected. Critics called him a “bull‑ish tech” commentator, yet he proved himself right again in 2023 when the broader market corrected.

Burry’s new short is therefore consistent with his track record of betting against hype—a pattern he has described in a 2023 interview with Bloomberg, where he said, “I don’t invest in the hype; I invest in the fundamentals.” The article includes a brief link to that interview for readers who want deeper insight into his philosophy.

Potential Implications for Investors

The article goes on to discuss what Burry’s move means for the broader investor community:

• Signal of caution: Burry’s public position often triggers a “re‑evaluation” of AI valuations by other institutional investors. His short bet may lead to a ripple effect where analysts re‑price AI companies.

• Risk‑premium recalibration: By taking a bearish position, Burry is effectively re‑pricing the risk premium on AI ETFs. If the short unwinds as expected, it could signal a shift from a “growth‑first” mindset to a “value‑first” approach in tech.

• Infrastructure upside: Burry’s complementary long in data‑center stocks could inspire more institutional capital to flow into infrastructure—an asset class often overlooked in the AI boom narrative.

Bottom Line

Michael Burry’s bet against AI is a calculated, data‑driven gamble rooted in his long history of betting against speculative bubbles. By shorting AI ETFs and hedging with put spreads, while simultaneously backing the infrastructure that powers AI, he demonstrates a nuanced approach that balances skepticism about hype with recognition of the underlying need for technology. For investors, the move underscores the importance of scrutinizing valuations, staying vigilant about regulatory developments, and diversifying across the AI ecosystem, from the software to the hardware that powers it. Whether Burry’s bet pays off will be watched closely by the market—perhaps for years to come.