Michael Burry says he regrets not sounding the alarm about the events leading up to the 2008 Great Financial Crisis (GFC), but now plans to correct the error by warning investors about a major weakness in the AI boom.
In a new post on X, the investor behind “The Big Short” says he’s been actively posting warnings about the AI cycle after reflecting on his conduct in the years before the GFC.
“People wonder why I do this, but if there is one thing I wish I could have done, it was to have effectively warned or spoken about what was happening 2005–2007.”
He shares an excerpt from Satya Nadella, where the Microsoft CEO explicitly cautions against locking in massive capital expenditures tied to a single generation of hardware.
“The other thing is that I didn’t want to get stuck with a massive scale of one generation. We just saw the GB200s; the GB300s are coming. By the time I get to Vera Rubin, Vera Rubin Ultra, guess what, the data center is going to look very different because the power per rack, power per row, is going to be so different. The cooling requirements are going to be so different. That means I don’t want to build out a whole number of gigawatts that are only for a one-generation, one family.”
Nadella continues by framing AI infrastructure as a depreciation risk if capital is deployed too aggressively, too early.
“We’ll keep ramping up our gigawatts, and the question is at what pace and in what location. And how do I ride Moore’s law on it, which is do I really want to overbuild three and a half GW in 2027, or do I want to spread that in 2027–28 knowing even… One of the biggest learnings we had even with Nvidia is that their pace increased in terms of their migrations. That was a big factor. I didn’t want to get stuck for four years, five years of depreciation on ONE generation.”
According to Burry, Nadella himself is exercising discipline, as he does not want to participate in the investor FOMO (fear of missing out) amid the AI buildout.
“Nadella is naming generations of Nvidia GPUs, saying he does not want to build so much infrastructure catering to one generation, which is now lasting only one year each. He clearly is worried about the economic value subtracted by spending too much on one generation, surely to be superseded by the next generations in an accelerating fashion. Not just that, but the cooling requirements and power usage become more complex with each iteration.”
Burry’s warning appears to echo the ghosts of the 2008 crisis, when people assumed they could refinance, sell or rent at higher prices. Today, investors believe that every data center will be filled, every chip will be used efficiently and every dollar of CapEx will earn its keep.
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