Michael Burry expresses concerns over AI industry's vulnerability to disaster

Michael Burry, a prominent investor known for his role in "The Big Short, has expressed grave concerns over the AI industry's vulnerability to disaster. In a recent Substack post, he cited Anthropic's initial public offering (IPO) filing as evidence of the sector's potential catastrophe.

Burry pointed out several red flags in Anthropic's financials, including its massive spending commitments and slowing revenue growth. The company has entered into agreements worth hundreds of billions of dollars to purchase computing resources from major tech players like Amazon, Alphabet, and Microsoft, with total commitments exceeding 12 times its current annual revenue.

Anthropic's parent company is the developer of Claude, a cutting-edge AI model that is expected to be one of the most significant IPOs in history.

Michael Burry's recent Substack post has shed light on some of the complex financing arrangements in the AI industry. He pointed out that Anthropic's IPO filing is a prime example of the intricate web of debt and financial instruments used to fund these companies.

The deal between Anthropic and Broadcom, facilitated by Apollo and Blackstone, involves convertible notes and structured credit tranches. Burry noted that this complexity arises from the need for excessive debt, which must be unloaded from the balance sheets of those involved.

This interconnectedness may provide a sense of security while the market is rising, but it leaves the entire industry vulnerable to collapse either when growth pauses or reverses. Burry characterized these financing arrangements as garish and audacious," highlighting the challenges faced by hyperscalers in generating sufficient cash to fund their AI buildouts.

Anthropic's financial performance is a mixed bag as revealed in its IPO filing. The company reported revenue exceeding $16 billion for the first six months of this year, a significant 14-fold increase from the same period in 2025.

This growth has been accompanied by a narrowing operating loss, which decreased by about two-thirds to below $700 million. Additionally, Anthropic generated nearly $4 billion in operating cash flow during the same period.

The company's revenue growth appears to be slowing down, with a 46% increase between the second and third quarters of this year, following a more substantial 144% rise between the first and second quarters.

Michael Burry's latest critique targets Anthropic, an artificial intelligence company that filed for an initial public offering earlier this year. His concerns have been ongoing since he shifted his focus from running a hedge fund to writing about personal investments on Substack last winter.

Burry has repeatedly expressed skepticism towards the AI industry, citing various red flags including slowing growth, aggressive accounting practices, and circular financing deals.