Michael Burry is raising fresh alarms about the economics of artificial intelligence, noting that large language models (LLMs) may be fundamentally incompatible with the business model that made Google one of the most profitable companies in history.
In a new Against the Rules podcast interview, the “Big Short” investor breaks down why AI threatens Google Search at a structural level, focusing on the simple math behind what each system costs to run.
Before the hype cycle around chatbots, he says, Google’s core product succeeded because it was nearly free to deliver.
“Google Search, the magic thing about Google Search, was how little it cost. Because most requests were not monetizable. So for the 85% of searches they get, nobody’s going to buy anything. It’s history. ‘What did Columbus really do?’ It’s not monetizable. And so they better not lose a lot of money on that.”
According to Burry, Search worked because it scaled to billions of queries a day while costing Google fractions of a cent per answer. But the famed short-seller says AI blows that equation apart.
“AI changes that. AI is expensive. I run queries regularly that I know cost tens of dollars just for my inquiry. One inquiry. Google had those searches down to infinitesimal fractions of a cent. So that business is the golden goose, and it’s really basically all their cash flow.”
Burry also comments on the news that Warren Buffett’s Berkshire Hathaway bought $4.33 billion worth of Google (GOOGL) stock in Q3 of this year.
“We don’t know that that is Buffett that bought it, one. Two, Google is the value investors’ favorite in that group. It’s the one that everybody said, ‘Well, it’s cheaper than all the others.’ It’s got relative value and it is Google. But I know that since I got ChatGPT and Claude, I don’t use Google.”
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