Was Michael Burry right about the AI bubble? Wall Street loses $2 trillion as AI and chip stocks plunge: Why are Tesla, Palantir, AMD, Broadcom and SanDisk crashing?

Michael Burry's AI bubble warning resurfaces as Dow, S&P 500 and Nasdaq lower amid $2 trillion sell-off: Wall Street has spent months rewarding companies connected to artificial intelligence. On Thursday, November 5, investors suddenly started questioning how much those companies are really worth. Nvidia, AMD, Micron, Broadcom and other semiconductor stocks plunged, while Tesla and Palantir joined the sell-off. The Nasdaq fell more than 4%, wiping out the previous session's gains. The S&P 500 and Dow also suffered heavy losses.

The timing has brought Michael Burry's AI bubble warning back into focus. The investor who predicted the 2008 housing crisis has questioned the valuations of AI companies and the returns expected from their enormous infrastructure investments. Thursday's losses do not prove his prediction right.

Why is the US stock market down today? Michael Burry's AI bubble warning returns as Dow, S&P 500 and Nasdaq suffer heavy losses

The three major US stock indexes came under intense selling pressure on Thursday. At 11:48 a.m. ET, the Dow Jones Industrial Average stood at 52,099.44, down 1,256.68 points, or 2.36%. The S&P 500 dropped 3.11% to 7,449.31, while the Nasdaq Composite plunged 4.20% to 24,655.51.


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The technology-heavy Nasdaq was hit hardest because of its exposure to semiconductor and AI companies. The Philadelphia Semiconductor Index also fell around 11% in intraday trading, according to Reuters.

The sell-off reversed Wednesday's post-election rally, which had followed the Democrats' victory in the US midterm elections. Investors are now concerned that political opposition to new data centres could slow AI infrastructure expansion. Candidates supporting restrictions on data centre development also secured important victories in Texas and Georgia.

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UBS strategists warned that around 30% of planned data centre capacity additions for 2028 could face delays or disruption.

Michael Burry has argued that the AI boom carries risks similar to previous investment bubbles. His concerns focus on high valuations, aggressive capital spending and accounting assumptions used by companies investing in expensive AI hardware.


One issue is depreciation. AI processors and servers require substantial investment, but their economic value may decline faster than companies assume. If businesses spread equipment costs over longer periods, their reported profits could look stronger than their actual economics justify.

Burry has also taken bearish positions involving Nvidia, Micron and Palantir, including put options, according to reports in September. His position has attracted attention as these stocks face another major decline.

Nvidia (NVDA): $186.65, down 6.74%.

Nvidia remains at the centre of the AI investment boom. Its processors power data centres used to train and operate advanced AI models. However, investors are questioning whether cloud companies and other customers can generate enough revenue from AI to justify their infrastructure spending.

Tesla stock crashes 9.71% as investors exit expensive technology shares

Tesla (TSLA): $347.80, down 9.71%.

Tesla is not a chipmaker, but its valuation is closely linked to expectations around autonomous driving, robotaxis, robotics and AI. When investors reduce exposure to high-growth technology companies, Tesla often faces pressure.

AMD stock plunges 12% as semiconductor sell-off deepens

Advanced Micro Devices (AMD) down around 12%. AMD suffered one of the biggest declines among major semiconductor companies. Its AI accelerator business has become an important part of its growth strategy, putting it in direct competition with Nvidia.

The concern is not simply whether AI chips will remain in demand. Investors want to know whether demand will grow fast enough to support current valuations and future earnings expectations.

Micron (MU) down around 10%.

Micron supplies high-bandwidth memory used in advanced AI processors. The AI expansion has increased demand for this technology, supporting expectations for stronger revenue and pricing.

Is the AI bubble bursting?

Thursday's market decline has exposed the biggest risk in the AI trade; companies may be spending faster than they can generate returns from their investments.

High borrowing costs, potential data centre restrictions, semiconductor competition and stretched valuations are creating pressure across the sector. Qualcomm's weaker smartphone-chip sales outlook has added to concerns about semiconductor demand. Hedge funds have also been reducing exposure to chipmakers and AI infrastructure companies.

Burry's warning has gained attention, but one trading session cannot establish that the AI boom is over. Investors now need evidence that AI infrastructure spending can support sustainable revenue, cash flow and profits.