Oracle suffered a 45% peak-to-trough decline while Google gained strength after its Gemini 3.0 launch.
Michael Burry holds a bearish view of the AI trade.
The equal-weight S&P 500 gained nearly 10% in 2025 as market strength broadened beyond AI leaders.
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The moment Michael Burry announced his bearish bets on some of the biggest winners of the AI trade, including the likes of Nvidia (NASDAQ:NVDA), it seemed like a bursting of the bubble was inevitable. Of course, even the great Michael Burry of The Big Short fame can’t be right all of the time. And while he’s raised some intriguing bear points (such as the GPU depreciation schedule and other accounting practices that might be a bit on the aggressive side) about the big tech innovators, which seem to be going all-in on the AI boom, I’m not so sure such finer details matter as much in the grander scheme of things, provided the AI revolution lives up to the high ROI hopes.
Undoubtedly, we’re going to need to see greater monetization of the technology in the new year. Otherwise, the path may very well be lower for the AI names, especially the ones that have enjoyed triple-digit percentage gains in just over a year. Personally, I don’t think an AI bubble bust is the only way the boom has to end. Additionally, I think Burry could make a fortune from his bearish bets on Nvidia and Palantir (NASDAQ:PLTR), without the entire trade going up in smoke.
How? Frequent rolling corrections concentrated in the AI stocks might be another way to “correct” moments of excess enthusiasm and pockets of severe overvaluation. Undoubtedly, perhaps the corrections could prove more isolated, punishing names like Palantir, as big-tech stars with more modest valuation multiples proceed higher. Undoubtedly, it seems like Google parent Alphabet (NASDAQ:GOOG) remains an AI trade that may very well be spared from future rolling corrections as they happen.
The stock remains quite cheap and might be a place to rotate profits from the massive winners, like Nvidia, for a shot at continued performance. Given the slowed momentum in shares of Nvidia, perhaps the fresh slate of 2026 will offer the means for a new class of leaders, many of whom might be more obvious than you’d think. Undoubtedly, the Magnificent Seven stars (especially Alphabet) stand out as having what it takes to lead the way for the AI trade moving ahead.
