Michael Burry, the celebrated American investor who famously foresaw the 2008 housing market collapse, has issued a stark warning about the United States' artificial intelligence strategy. His central concern is the nation's heavy reliance on the energy-intensive semiconductors produced by Nvidia, a dependency he claims gives China a critical structural advantage.
The Power Problem: Why Burry Says China Holds the Edge
In a detailed series of posts on the social media platform X, Burry laid out his argument. He shared a chart demonstrating that China's installed electricity generation capacity has surged far beyond that of both America and Europe since the early 2000s. For Burry, this isn't merely about total output; it's about the relentless pace of growth. "It is not just the total power advantage," he wrote. "It is the slope."
He contrasted this with the situation in the US, where development of the transmission grid is slowing due to regulatory hurdles. "U.S. transmission grid development is actually decelerating due to permitting issues, while China is building transmission at will to match power output," Burry stated. This fundamental mismatch in infrastructure, he warns, positions US companies to lose the AI arms race if they continue down a path of ever-increasing power consumption.
Nvidia's 'Death Grip' on American AI Development
Burry argues that Nvidia has established a "death grip" on AI development in the United States. Through its extensive investments and partnerships with major AI firms and startups, the industry has become locked into Nvidia's technological roadmap. According to Burry, Nvidia's development roadmap is essentially a power consumption roadmap, where innovation is increasingly focused on powering and cooling larger, hotter silicon chips.
"Power hungry Nvidia chips are not the way forward," Burry declared. He pointed out that efficiency gains have not kept pace with the explosive growth in computing demand, leading to spiraling electricity needs. This brute-force approach, centered on massive data centers, is what Burry believes the US must move away from.
His proposed solution is a strategic pivot. "The U.S. needs to get away from bigger and bigger power-hungry chips and innovate with AI-tuned ASICs like nobody's business," he advised, advocating for more specialized and efficient chip designs.
Putting Money Where His Mouth Is: Burry's Billion-Dollar Bets
Burry's firm, Scion Asset Management, is backing this analysis with significant financial action. A quarterly regulatory filing released in November revealed that Scion has acquired put options—financial instruments that profit if a stock's price falls—on two AI industry leaders: Nvidia (NVDA) and Palantir (PLTR).
The filing showed Scion owns the right to sell 5 million shares of Palantir and 1 million shares of Nvidia. At the time of the filing, these positions had a combined notional value of just under $1.1 billion, indicating a substantial bet that these stocks will decline.
This move has drawn sharp criticism from within the AI sector. Palantir's CEO, Alex Karp, responded to the news in a CNBC interview, calling the idea of shorting his company and Nvidia "bats--- crazy." Karp defended the two firms as being among the only companies "making all the money" in AI and suggested that such short bets could amount to "market manipulation."
Burry's warning presents a fundamental challenge to the prevailing narrative in the US tech industry. It shifts the focus from software algorithms and data to the underlying physical infrastructure—energy—suggesting that the race for AI supremacy may ultimately be won not just in silicon labs, but in power plants and on transmission grids.
