Good morning from the City AM liveblog team.
If you need a clear sign that there is an AI bubble, look no further.
American tech stocks fell sharply on Tuesday after a hedge fund manager famed for predicting the Global Financial Crisis revealed he had taken out a billion-dollar bet against some of the world’s largest artificial intelligence companies.
Michael Burry, the star stock picker whose decision to short the property market was depicted in the blockbuster ‘Big Short’ film, disclosed a similar $1.1bn (£843m) wager on Palantir and Nvidia shares falling, highlighting parallel between today’s AI boom and the dot com bubble of 2000.
In a series of posts on X, the Scion Asset Management founder highlighted slowing demand for cloud computing clashing with record-breaking capital expenditure from AI firms. He also posted a graph depicting the increasing financial interconnectedness of competing tech stocks, saying: “These aren’t the charts you are looking for. You can go about your business.”
Burry’s AI positions, which comprised a $912m bet against Nasdaq-listed tech giant Palantir and a $186m short of Nvidia, were disclosed alongside fresh investments in pharma firm Pfizer and Halliburton, the oil services giant.
Nvidia’s valuation was down five per cent from the all-time high it set on Monday. And shares in Palantir – which boasts one of the highest valuations in the world relative to its earnings – plunged by as much as 8.5 per cent before US markets opened Tuesday, before paring back some losses.
Here’s a summary of our other top headlines from yesterday:
ABF considers spinning off Primark
‘We all have to do our bit’ – Reeves primes Brits for tax hikes
Court rejects Getty Images’ core claim in historic case against AI image generator
Bank of England expected to hold interest rates in tight decision
Lawyers warn Reeves: Don’t destroy £60bn industry over LLPs gambit