Michael Burry Bets Against AI Hype, Buys Undervalued Tech Stocks

While the market fixates on artificial intelligence, Michael Burry, the investor famed for predicting the 2008 financial crisis, is strategically investing in companies left behind by the AI frenzy. Burry revealed on Substack that he has built significant positions in companies like PayPal, Adobe, MercadoLibre, Lululemon, and Zoetis.

Burry's "Whale Fall" Strategy

Burry described these neglected stocks as part of a "whale fall," a marine biology term for a whale carcass sinking to the ocean floor, which sustains ecosystems long after larger predators have moved on. This metaphor highlights his belief that these companies, despite market skepticism, offer long-term value ignored amidst the AI gold rush.

Specific Investments and Conviction

According to CNBC reports, Burry views MercadoLibre as a "clean long-term winner," having added to his position in the mid-$1,500 range. He also disclosed buying Adobe in the low $250s and stated his PayPal position is "complete," signaling strong conviction despite the payments company's year-to-date 23.9% decline. Adobe has fallen 26.9%, and Lululemon has dropped 42.1% this year, as investors favored companies with direct AI narratives.

Broader Market Warning

Burry's current stance echoes concerns similar to the late 1990s dot-com bubble, where excessive capital concentration in a single sector can distort market valuations. He believes fundamentally sound businesses are being abandoned simply because they are not directly involved in AI. His strategy focuses on acquiring these durable companies at deeply discounted prices during the AI boom, anticipating a potential market shift.

Scion Asset Management, Burry's firm, currently holds only nine positions, reflecting his preference for concentrated, high-conviction bets. The core of his thesis is not that AI will fail, but that the current excessive enthusiasm may be causing investors to overlook quality businesses with long-term earnings potential. Should market leadership broaden beyond AI, Burry's "whale fall" investments could see a significant rebound.