The 2008 financial crisis occurred because of the collapse of the housing market, driven by the sale of risky subprime mortgages. A famous name surged from this event, Michael Burry, the main character of the movie The Big Short. After years of silence, he has reappeared, is critiquing the AI bubble, and has recently invested one billion dollars against it.

Burry has a strong belief in the bursting of the AI bubble, calling tech companies frauds as they overstate their profits by ignoring the depreciation costs faced by AI. Burry has stated that between 2026 and 2028, the depreciation of Nvidia chips is being understated by $176 billion, ultimately increasing the industry's overall earnings. More specifically, Oracle and Meta values will be inflated by 27% and 21%, respectively.

Companies account for depreciation by implementing methods to underestimate depreciation costs. By simply extending the expected life cycle of chips, companies reduce their expected costs and increase their overall expected profits. Ultimately, this drives up investment, as the business model appears more profitable on paper than it actually is in practice. Thus, big tech companies are using simple accounting tricks to hide losses and boost earnings.

Moreover, some effects of the AI bubble have begun to show since October 29, when Nvidia's stock peaked. AI stocks have lost approximately 2.4$ trillion in their values since then, with Nvidia stocks losing 11% of their value, around 549 billion of the company's value. Right now, AI companies are experiencing a lack of bounce-back, as investors have begun a slow AI sell-off, the news of a potential bubble has become mainstream, and AI companies are exposed for unethical accounting tactics that have influenced their profits and losses.

According to some economists, the AI bubble has begun to tear due to continuous losses and unethical tactics. However, some economists have assumed that the crisis has not yet started and that a worse one is building. On the other hand, critics believe this is just a market fluctuation and that AI companies will continue to grow.

Works Cited
“'Big Short' investor Michael Burry accuses AI hyperscalers of artificially boosting earnings.” CNBC, 11 November 2025, https://www.cnbc.com/2025/11/11/big-short-investor-michael-burry-accuses-ai-hyperscalers-of-artificially-boosting-earnings.html. Accessed 21 November 2025.
KRANTZ, MATT. “Bursting AI Stock Bubble Gets Ugly — Erases $2.4 Trillion In Value.” Investor's Business Daily, 20 November 2025, https://www.investors.com/etfs-and-funds/sectors/bursting-ai-stock-bubble-worsens-destroys-trillions-in-value/. Accessed 21 November 2025.