An AI Bubble Warning : Predictor of 2008 crisis says valuations of tech firms are inflated

Among the very few who predicted the 2008 subprime crisis that led to some of the biggest investment banks going bust and a global recession was Dr Michael Burry. He became a reclusive celebrity after actor Christian Bale played him in the iconic movie The Big Short. Burry is back in the news again, predicting that there is now an AI bubble waiting to burst, which implies the valuation of the tech companies that have touched stratospheric valuations of trillions of dollars could nosedive. Burry started a Substack newsletter service and one post of his especially targets Nvidia, which makes most of the GPUs fuelling the data centres. Burry compared it to a company called Cisco, which had a similar role to play as the internet era dawned but soon got badly undone by the dotcom bust.

But Burry's is not the only voice of apprehension about the valuations around AI, even if it has the ability to change the future. In an interview with the BBC, Google's CEO Sunder Pichai said that there were elements of irrationality in it, and should there be a drawdown, every company would be affected, including his own.  Nvidia is taken as the prime example simply because it is now worth more than US$ 4 trillion, the most valued company in the world. That allocates to it a near monopoly status indefinitely into the future, even though competition is coming up from companies with formidably deep pockets like Google, who have their line-up of chips called TPUs.