High-profile Investor Takes Stand Against the AI Hype
Renowned investor, recognized for predicting the 2008 financial meltdown, has returned from a two-year break to alert the public about the dangers of the current artificial intelligence (AI) boom. While many see AI as a groundbreaking technology that will boost productivity and profits, he views it as overhyped, speculative and excessive.
He reappeared on the scene with an ominous post which read, "Sometimes, we see bubbles. Sometimes, there is something to do about it. Sometimes, the only winning move is not to play." This statement references a scenario from the film "WarGames" where an AI supercomputer runs nuclear war simulations, all ending in mutual destruction. His quote highlights the potential risks he believes are present in today's market.
Return of the Market Skeptic
Indicating he is here to stay, he updated his social media bio to read, "Cassandra Unchained: Missteps to Mayhem, Coming December 2025, Stay Tuned." This seemingly cryptic message refers to the Greek myth of Cassandra, who was doomed to predict accurate prophecies but never be believed. It also points to a past speech where he detailed the build-up and collapse of the subprime mortgage bubble, as well as the vulnerabilities it exposed in the US financial system.
He positioned himself as a critic of the mainstream AI narrative, likening his role to a Jedi fighting against the Empire. He used a still from "Star Wars: A New Hope" as his social media banner and posted a statement indicating his skepticism towards current market trends.
AI Boom Under Scrutiny
He shared three charts providing insights into his bearish views on the AI hype. The first showed a significant slowdown in growth for major cloud-computing divisions. The second pointed to a surge in capital expenditures in the US tech sector during the AI boom, reminiscent of similar spikes before past market crashes. His third chart exposed a cycle of deals between prominent AI companies.
His posts highlight his doubts about the AI boom. He perceives similarities to the dot-com bubble in the intertwined deals of tech giants. He suggests that these companies may be risking huge investments in infrastructure that could remain unused if demand drops and valuations plummet, as they did over two decades ago.
Betting Against AI Darlings
He solidified his views with two significant bets made last quarter. His firm bought bearish put options on a combined total of 6 million shares from two major tech companies, with a notional value of roughly $1.1 billion.
The bets constituted a significant part of the firm's US stock portfolio, which only contained eight holdings in total, including just four direct positions worth a combined $68 million.
Despite recent stock price drops for these two tech companies, they have seen significant price increases over the past few years. One became the first company to secure a $5 trillion market value last week, while the other was valued at nearly $500 billion at Monday's close — surpassing the worth of other major corporations.
However, this high valuation and growth expectation could potentially lead to a sharp decline if they fail to meet expectations, especially considering the increasing use of margin and levered ETFs by investors.
While he stands to make a significant profit if these tech companies stumble, there is a risk of getting caught up in momentum and liquidity-fueled markets if they continue to impress investors and interest rates continue to be cut.
Investor Opinions on AI Stocks
Other investors have voiced agreement with his stance on AI stocks. The founder of an asset management firm stated that he broadly agrees with the skeptical view of the AI stocks.
