Big Short legend Michael Burry warns on AI boom
Michael Burry, the legendary investor who famously predicted the 2008 housing market collapse, has issued his starkest warning yet about the artificial intelligence boom—this time by pointing to one of corporate America's most catastrophic failures.
In a post on X, Burry shared a link to The Smartest Guys in the Room, the 2003 book about energy giant Enron's scandalous collapse, writing: "History is repeating. Time to read this one again, or for the first time."
While Burry did not elaborate on which aspects of history he believes are repeating, the timing appears deliberate. He closed his hedge fund Scion Asset Management in November 2025, after managing approximately $155 million in assets, telling investors that his "estimation of value in securities is not now, and has not been for some time, in sync with the markets."
For months, Burry has been sounding alarms about the extraordinary capital being poured into AI infrastructure, questioning whether the investments will generate returns sufficient to justify their enormous cost. His concerns center on accounting assumptions and complex financing arrangements that he argues could be masking the true scale of risk—echoes of the techniques that brought down Enron.
The Enron Parallels
Enron's collapse in December 2001 stands as a watershed moment in American corporate history. The Houston-based energy trader, which held more than $60 billion in assets at the time, filed for what was then the largest bankruptcy reorganization in U.S. history.
The company had used mark-to-market accounting to book estimated future profits from long-term contracts immediately, while hiding debt and losses through special-purpose entities. The result was a firm that appeared extraordinarily profitable while accumulating catastrophic risks beneath the surface. The scandal led to the passage of the Sarbanes-Oxley Act in 2002, which imposed harsh penalties for financial record manipulation and barred auditing firms from providing concurrent consulting services to the same clients.
The fallout extended beyond Enron itself. Arthur Andersen, one of the world's five largest accounting firms at the time, was dissolved after being convicted of obstruction of justice for shredding documents related to Enron audits.
Questioning AI Accounting Assumptions
Burry's criticism of today's AI boom focuses particularly on depreciation and the timing of expense recognition. Companies typically spread the cost of expensive equipment over several years rather than booking it immediately. If firms assume AI hardware will remain useful for longer periods, annual depreciation expenses appear smaller and reported profits look healthier.
The investor has argued that major technology companies could be understating depreciation by approximately $176 billion between 2026 and 2028 through aggressive accounting assumptions related to AI infrastructure investments.
The scale of spending involved is staggering. The five largest U.S. cloud and AI infrastructure providers—Microsoft, Alphabet, Amazon, Meta, and Oracle—are projected to spend between $660 billion and $690 billion on capital expenditures in 2026 alone, nearly double 2025 levels. Industry analysts predict worldwide data center infrastructure capital expenditures will grow from $679 billion in 2025 to $1.7 trillion by 2030, representing a 21% compound annual growth rate.
Burry has also pointed to intricate financing arrangements between companies involved in the AI boom, arguing that the money flowing through the sector can obscure the true magnitude of investment for ordinary investors.
Betting Against the Boom
Burry has backed his concerns with concrete investment positions, disclosing bets against a string of major AI companies including Nvidia, Palantir, Oracle, Nebius and Micron.
His skepticism comes as Nvidia's remarkable growth trajectory shows signs of moderating. After surging approximately 180% in 2024 and gaining another 39% in 2025, the chipmaker's stock has risen only around 5% so far in 2026—modest by comparison to its recent performance.
This is not Burry's first invocation of Enron in the context of modern financial markets. Following Silicon Valley Bank's collapse in March 2023—the second-largest bank failure in U.S. history after Washington Mutual—he suggested: "It is possible today we found our Enron." That failure followed a devastating bank run that drained $42 billion in deposits in a single day.
A Prophet With a Track Record
Burry's warnings command attention because of his proven ability to identify market excesses before they become obvious to others. His original hedge fund, Scion Asset Management, recorded returns of 489.34% net of fees between its November 2000 inception and June 2008, while the S&P 500 gained just over 2% during the same period.
His bet against the U.S. housing market before the 2008 financial crisis—immortalized in Michael Lewis's book The Big Short and the subsequent Hollywood film—cemented his reputation as an investor willing to challenge popular narratives when he believes prices have become detached from reality.
However, his track record does not guarantee every prediction will prove correct. Markets can remain expensive far longer than skeptics anticipate, and AI is already transforming businesses while generating enormous demand for computing power.
Distinguishing Warning From Accusation
Importantly, Burry is not accusing today's AI companies of committing Enron-style fraud. There is no evidence that firms such as Nvidia, Microsoft or Oracle are engaged in the type of criminal conduct that destroyed Enron.
Rather, his argument appears to be that investors should carefully examine whether spectacular growth figures and elevated valuations rest on assumptions about future returns that could ultimately prove too optimistic—particularly as the AI boom becomes increasingly dependent on vast amounts of capital, electricity, data centers and sophisticated financing structures.
His latest post prompted mixed reactions on social media, ranging from agreement and references to other corporate collapses like WorldCom, to jokes about the book's title and gallows humor about potential executive downfalls. Others questioned whether the Enron comparison was apt given the current lack of evidence for fraud.
The distinction matters. If demand for AI continues growing as expected, the massive infrastructure investments could look prescient. But if growth disappoints or takes longer to materialize than anticipated, investors may discover that some of the world's most valuable companies have been making enormous assumptions about a future that fails to arrive on schedule.
