By Mari Hansen 
The sentiment surrounding artificial intelligence can feel oddly divided on a quiet Midtown Manhattan trading floor. While some desks, usually the quieter ones, are studying something completely different, screens glow with charts of Nvidia and Microsoft rising steadily. They are trying to find ways to wager against the AI boom.
Artificial intelligence has emerged as the decade’s most significant investment story for the majority of the market. Companies that build data centers, design chips, or write the software that powers large language models have received trillions of dollars in market value. Investors discuss AI in a manner similar to how earlier generations discussed the internet.
| Category | Details |
|---|---|
| Theme | Hedge funds betting against AI-related stocks |
| Major Concern | Overvaluation and accounting practices in AI infrastructure |
| Key Investor Mentioned | Michael Burry (Scion Asset Management) |
| Estimated Short Exposure | ~$1 billion against AI-related stocks |
| Targeted Areas | AI chips, cloud infrastructure, Big Tech earnings |
| Companies Often Debated | Nvidia, Oracle, Meta, Microsoft |
| Key Issue Raised | Depreciation of AI hardware and data center costs |
| Broader Market Trend | Massive capital spending on AI infrastructure |
| Investor Strategy | Short positions, valuation arbitrage, hedging |
| Reference Source | https://www.ft.com |
Michael Burry, the investor well-known for foreseeing the 2008 housing crash—a transaction that was later dramatized in the movie The Big Short—has expressed some of the strongest skepticism. Burry revealed in recent months that he had wagered about $1 billion against businesses associated with the wave of artificial intelligence. The market was taken aback by the action. It always works to bet against a dominant trend.
Burry’s doubts might stem from a straightforward issue: the enormous amount of money being spent in the technology sector. It costs a lot of money to build AI infrastructure. Tens of billions of dollars can be spent on data centers that house specialized processors, and businesses like Microsoft, Meta, and Amazon are constructing them remarkably quickly.
The scale is evident outside one of these facilities in northern Virginia, which is now known as Data Center Alley. Power lines and cooling towers encircle long, rectangular buildings that span industrial parks. AI models are trained by the machines inside, creating a massive computational demand.
However, those devices also deteriorate. The hedge funds’ argument revolves around that particular detail.
Major tech companies are allegedly spreading the cost of AI infrastructure over longer accounting timelines than the hardware actually lasts, according to some investors. Businesses can report higher short-term profits by extending depreciation schedules, sometimes from three to five or six years.
One analyst recently noted that “earnings today may be overstated if the equipment becomes obsolete faster than the accounting assumes.” It’s a technical dispute. However, the numbers are huge. Tens of billions of dollars in depreciation expenses may eventually appear on income statements, according to some estimates. There appears to be disagreement among investors regarding the significance of that.
The demand for processing power is still growing quickly, according to proponents of the AI boom. Nearly every year, Nvidia releases new chips, with each generation being noticeably faster than the previous. Businesses are eager to purchase every processor that is available as they race to develop AI models.
Older hardware is rarely idle in that setting. However, crowding is another concern of skeptics.
Some hedge fund managers believe that AI is now the busiest trade on Wall Street. Almost all of the major portfolios have investments in companies such as Microsoft, Alphabet, and Nvidia. Even minor setbacks can lead to abrupt selling when everyone owns the same stocks. History offers a few reminders.
Legitimate technological advancements also sparked the dot-com bubble of the late 1990s. The global economy was genuinely transformed by the internet. However, the early zeal of the market drove valuations well above what many businesses could support.
Sometimes it’s difficult to ignore the similarities as you watch the current AI race take place. The skeptics are not necessarily correct, though.
Instead of placing bets against AI, many hedge funds are actually increasing their exposure to it. Investment firms such as Bridgewater, Tiger Global, and Coatue have increased their holdings in Microsoft, Alphabet, Nvidia, and other industry leaders. In other words, the market is debating itself.
On the one hand, investors are certain that AI will transform a variety of sectors, including logistics and healthcare. Conversely, there are those who silently question whether the financial gains will live up to the high expectations that are now incorporated into stock prices.
Both groups are studying the same numbers. However, their perceptions are different.
The sheer power of the technology is evident when one passes a row of servers humming inside a data center, with lights blinking and fans forcing hot air through long metal aisles. The machines are actual. There is a genuine need for computing. The rate of profit is still unknown.
When hedge funds wager against the AI boom, they are essentially posing a single question: will the economics remain as impressive as they are now when the hype subsides and accounting catches up? The answer might be in the affirmative.
Sitting quietly at their desks while the rest of the market celebrates, it’s also possible that the skeptics are getting ready for a moment when sentiment changes, either gradually at first or all at once.