Michael Burry is a famous investor played by Christian Bale in the movie “The Big Short”. Burry predicted the mortgage market collapse and financial meltdown in 2008; He played for losses (short selling) on risky loans well in advance. When the crash came, Burry's decisions brought investors almost 500 percent profits, and he himself was considered an oracle – recalled the Washington Post.
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In recent days, Michael Burry invested $1 billion, betting on the losses of two Wall Street favorites, Nvidia and Palantir. In October, Nvidia became the first company to reach $5 trillion in market valuation. Palantir's market value of $450 billion is the equivalent of its revenues multiplied 624 times, reports the Economist.
On the day when Burry bet on the losses of these companies, at the end of the trading session the first one lost 4%, and the second one almost 8%. The broad S&P 500 index fell 1.2%. and the Nasdaq, an index of technology companies, by 2 percent. – reported the Washington daily. In the following days, stock exchanges in Europe and Asia reacted with declines – noted the British “Guardian”.
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The UK central bank warned in a report that the market could face a “sharp correction” due to the overvaluation of AI companies; Deutsche Bank also released a report in which it concluded that the boom in this sector “is unsustainable,” reported the American portal Ringer.
Gita Gopinath, former chief economist of the International Monetary Fund (IMF) and professor of economics at Harvard, recently published an article in the weekly “Economist” in which she estimates that After the wave of enthusiasm that attracted large investments into the AI sector, a crash may come, similar to the collapse on the so-called dotcoms in the 1990s. This time, however, the consequences of such a collapse “may be much more serious and more global.”
Are we at risk of a new financial meltdown?
“Americans and foreign investors, especially from Europe, encouraged by the rate of return, have been investing more and more in American stocks for over 15 years,” Gopinath wrote.
The expert calculated that “a market correction on the same scale as the dotcom crash would wipe out $20 trillion. assets of American farms, which is roughly equivalent to 70 percent. American GDP in 2024 (…) Foreign investors would suffer losses exceeding USD 15 trillion.” And as reported by the Financial Times, Asian investors are already afraid that “the American AI bubble will turn out to be contagious.”
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The Economist estimates that such a crash would impoverish American farms by 8%. and would have far worse consequences for ordinary Americans than the bursting of the dotcom bubble. Especially since approximately USD 42 trillion. (20 percent of Americans' total wealth) is invested in American stock market assets.
Since ChatGPT appeared in 2022, the value of the US stock market has increased by USD 21 trillion, while AI companies do not yet generate revenues adequate to this valuation. “Will this divergence turn the AI market boom into a bust?” – wonders the British weekly.
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Both Gopinath and the media point out that this time the risk of a stock market collapse is even more dangerous because the general condition of the American economy is not the best. GDP growth in the US in the first half of 2025 was driven solely by investments in the artificial intelligence sector, which, however, did not bring an increase in profits for companies.
Nobel Prize winner in economics, prof. Paul Krugman wrote on his blog that the boom in the AI sector masks the disastrous economic consequences of US President Donald Trump's policy.
The British weekly also emphasizes that in some respects the US economy is in a “historically unique situation”: stock investments are responsible for a record-high part of the wealth of American farms – 30%. At the height of the dotcom crisis it was 26%.
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Meanwhile, “WP”, citing analysts, writes that many of them predict that “the speculative bubble will soon burst”, and such fears are growing “in financial and technological circles”.
Ringer reminds that such a “rapid correction” would lead to the loss of thousands of jobs, the evaporation of money from stock investments, pension and education funds, and the destruction of the entire life savings of many Americans.
