Michael Burry's Bearish Prediction on AI Stocks
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1 hour ago
0mins
Should l Buy MSFT?
Source: NASDAQ.COM
- Burry's Accusations Against Big Tech: Burry claims that major tech firms like Meta and Microsoft are manipulating accounting practices and extending depreciation schedules to inflate earnings, although he overlooks the long-term value of AI infrastructure and the potential for reusing GPUs.
- CAPEX and Cash Flow Strain: Burry warns that unprecedented capital expenditures will strain cash flow; however, Alphabet's cash from operations has soared from under $100 billion to $164 billion by 2026, demonstrating significant cash flow growth driven by AI.
- NVIDIA Valuation Controversy: Burry compares NVIDIA to Cisco during the 2000 internet bubble, arguing it is overvalued, yet NVIDIA's current P/E ratio of 47 is significantly lower than Cisco's over 200 at its peak, highlighting fundamental differences between the two.
- Surge in H100 Rental Prices: Since mid-December, rental prices for NVIDIA's H100 GPUs have increased by approximately 17%, indicating strong demand for AI infrastructure, which bodes well for related stocks like Nebius and CoreWeave.
Trade with 70% Backtested Accuracy
Stop guessing "Should I Buy MSFT?" and start using high-conviction signals backed by rigorous historical data.
Sign up today to access powerful investing tools and make smarter, data-driven decisions.
Analyst Views on MSFT
Wall Street analysts forecast MSFT stock price to rise
34 Analyst Rating
32 Buy
2 Hold
0 Sell
Strong Buy
Current: 397.230
Low
500.00
Averages
631.36
High
678.00
Current: 397.230
Low
500.00
Averages
631.36
High
678.00
About MSFT
Microsoft Corporation is a technology company that develops and supports software, services, devices, and solutions. Its Productivity and Business Processes segment consists of products and services in its portfolio of productivity, communication, and information services, spanning a variety of devices and platforms. It comprises Microsoft 365 Commercial products and cloud services; Microsoft 365 Consumer products and cloud services; LinkedIn, and Dynamics products and cloud services. The Intelligent Cloud segment consists of its public, private, and hybrid server products and cloud services. It comprises server products and cloud services, including Azure, and enterprise and partner services, including Enterprise Support Services. Its More Personal Computing segment primarily comprises Windows and Devices, including Windows OEM licensing; Gaming, including Xbox hardware and Xbox content; Search and news advertising, comprising Bing and Copilot, Microsoft News, and Microsoft Edge.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Microsoft Expected to Increase Free Cash Flow in 2026 Amid AI Spending Surge
- Free Cash Flow Growth: According to Evercore ISI, Microsoft is expected to increase its free cash flow by 5% in 2026, contrasting with declines anticipated for Amazon, Google, and Meta, indicating Microsoft's stronger financial resilience amid AI infrastructure investments.
- Surge in Capital Expenditure: The industry's capital expenditure is projected to grow by 58% in 2026, exceeding $700 billion, positioning Microsoft favorably for future market competition, although short-term free cash flow may face pressure.
- Shift in Investor Focus: Evercore analysts note that as free cash flow dips below zero in some cases, investors may increasingly prioritize return on invested capital and capital allocation, especially if debt becomes a significant funding source for infrastructure expansion.
- Industry Uncertainty: While AI-driven demand offers compelling long-term investment rationale, the near-term weakening of free cash flow and constrained capital returns may affect investor confidence, prompting a shift towards less capital-intensive assets in search of stability.
See More
Michael Burry's Bearish Prediction on AI Stocks
- Burry's Accusations Against Big Tech: Burry claims that major tech firms like Meta and Microsoft are manipulating accounting practices and extending depreciation schedules to inflate earnings, although he overlooks the long-term value of AI infrastructure and the potential for reusing GPUs.
- CAPEX and Cash Flow Strain: Burry warns that unprecedented capital expenditures will strain cash flow; however, Alphabet's cash from operations has soared from under $100 billion to $164 billion by 2026, demonstrating significant cash flow growth driven by AI.
- NVIDIA Valuation Controversy: Burry compares NVIDIA to Cisco during the 2000 internet bubble, arguing it is overvalued, yet NVIDIA's current P/E ratio of 47 is significantly lower than Cisco's over 200 at its peak, highlighting fundamental differences between the two.
- Surge in H100 Rental Prices: Since mid-December, rental prices for NVIDIA's H100 GPUs have increased by approximately 17%, indicating strong demand for AI infrastructure, which bodes well for related stocks like Nebius and CoreWeave.
See More
Asia-Pacific Markets Volatile Amid Tariff Threats
- Tariff Threat Resurgence: President Trump announced on social media that countries engaging with the Supreme Court ruling will face higher tariffs, proposing a 15% global tariff under Section 122 of the 1974 Trade Act, which could escalate international trade tensions and undermine global market confidence.
- Focus on China's LPR: Investors are closely watching China's loan prime rate (LPR) decision, particularly the one-year LPR as a benchmark for new commercial loans and the five-year LPR guiding property loans, which will directly impact financing costs and market liquidity in the Chinese economy.
- Mixed Performance in Asia-Pacific: Hong Kong's Hang Seng index futures fell to 26,869, below the previous close of 27,081.91, while South Korea's KOSPI dropped 1.1%, indicating market concerns over economic outlook, despite Japan's Nikkei 225 rising by 0.77%.
- U.S. Market Impact: U.S. markets saw widespread declines on Monday, with the Dow Jones Industrial Average dropping 1.66% and the Nasdaq Composite falling 1.13%, reflecting investor fears over AI potentially disrupting software companies, further affecting sentiment in the Asia-Pacific region.
See More
Nvidia's AI Empire: Future Outlook and Growth Potential
- Significant Revenue Growth: Nvidia generated over $130 billion in revenue last year, marking a 114% year-over-year increase, which highlights its strong market demand and profitability in the AI sector, with gross margins consistently exceeding 70%, providing a solid foundation for future investments.
- Market Valuation Decline: Currently, Nvidia's price-to-earnings ratio has dropped to 24x, its lowest level in nearly a year, and historical data indicates that when the stock was similarly undervalued last year, it surged 90% over six months, suggesting a potential rebound opportunity.
- Data Center Sales Outlook: CFO Colette Kress stated that Nvidia is on track to exceed its $500 billion sales forecast for data center products, indicating sustained strong demand in the AI hardware market, which could lay the groundwork for future performance growth.
- Long-Term Growth Potential: While the stock may not double as it did last year in the short term, Nvidia's leadership in AI and evidence of customer support suggest that investors holding the stock for several years are likely to see substantial returns.
See More
US Stocks Plunge as Trade Policy Concerns Emerge
- Market Decline: On Monday, the S&P 500 Index fell by 1.04%, the Dow Jones Industrial Average dropped by 1.66%, and the Nasdaq 100 Index decreased by 1.21%, reflecting risk-off sentiment triggered by uncertainty over U.S. trade policy.
- Tariff Increase: President Trump signed an executive order raising global tariffs from 10% to 15%, a move that could curb global economic growth and negatively impact the stock market, particularly as it faces existing pressures.
- AI Risk Impact: A report from Citrini Research detailing potential risks of artificial intelligence on the global economy led to declines in software and payment stocks, with Datadog and Atlassian seeing drops of over 11% and 10%, respectively, indicating market concerns over tech stocks.
- Economic Data Highlights: Despite the stock market downturn, the U.S. January Chicago Fed National Activity Index rose by 0.39 to 0.18, surpassing expectations, suggesting that the economic fundamentals remain strong and may provide support for a future market rebound.
See More
Nvidia Stock Stagnates but Outlook Remains Positive
- Significant Revenue Growth: Nvidia generated over $130 billion in revenue over the past year, reflecting a 114% year-over-year increase, which indicates strong performance in the AI sector and sustained market demand, despite recent stock stagnation, the company's profitability remains robust with gross margins exceeding 70%.
- Cautious Market Expectations: Although Nvidia's stock has reached a forward P/E ratio of 24, its lowest in nearly a year, investor concerns about the economy and the AI market persist, which may impact future stock performance, especially ahead of the upcoming earnings report.
- Strong Demand for Data Center Products: CFO Colette Kress stated that Nvidia is on track to exceed its $500 billion sales forecast for data center products, reflecting ongoing demand for its critical GPUs and solidifying its leadership position in the AI market.
- Historical Performance Suggests Potential: Historical data shows that when Nvidia's stock was at low levels, it climbed 90% over six months, suggesting a potential rebound from current prices, although the market remains cautious about rapid growth, the long-term growth potential still exists.
See More
Microsoft Expected to Increase Free Cash Flow in 2026 Amid AI Spending Surge
- Free Cash Flow Growth: According to Evercore ISI, Microsoft is expected to increase its free cash flow by 5% in 2026, contrasting with declines anticipated for Amazon, Google, and Meta, indicating Microsoft's stronger financial resilience amid AI infrastructure investments.
- Surge in Capital Expenditure: The industry's capital expenditure is projected to grow by 58% in 2026, exceeding $700 billion, positioning Microsoft favorably for future market competition, although short-term free cash flow may face pressure.
- Shift in Investor Focus: Evercore analysts note that as free cash flow dips below zero in some cases, investors may increasingly prioritize return on invested capital and capital allocation, especially if debt becomes a significant funding source for infrastructure expansion.
- Industry Uncertainty: While AI-driven demand offers compelling long-term investment rationale, the near-term weakening of free cash flow and constrained capital returns may affect investor confidence, prompting a shift towards less capital-intensive assets in search of stability.
See More
Michael Burry's Bearish Prediction on AI Stocks
- Burry's Accusations Against Big Tech: Burry claims that major tech firms like Meta and Microsoft are manipulating accounting practices and extending depreciation schedules to inflate earnings, although he overlooks the long-term value of AI infrastructure and the potential for reusing GPUs.
- CAPEX and Cash Flow Strain: Burry warns that unprecedented capital expenditures will strain cash flow; however, Alphabet's cash from operations has soared from under $100 billion to $164 billion by 2026, demonstrating significant cash flow growth driven by AI.
- NVIDIA Valuation Controversy: Burry compares NVIDIA to Cisco during the 2000 internet bubble, arguing it is overvalued, yet NVIDIA's current P/E ratio of 47 is significantly lower than Cisco's over 200 at its peak, highlighting fundamental differences between the two.
- Surge in H100 Rental Prices: Since mid-December, rental prices for NVIDIA's H100 GPUs have increased by approximately 17%, indicating strong demand for AI infrastructure, which bodes well for related stocks like Nebius and CoreWeave.
See More
Asia-Pacific Markets Volatile Amid Tariff Threats
- Tariff Threat Resurgence: President Trump announced on social media that countries engaging with the Supreme Court ruling will face higher tariffs, proposing a 15% global tariff under Section 122 of the 1974 Trade Act, which could escalate international trade tensions and undermine global market confidence.
- Focus on China's LPR: Investors are closely watching China's loan prime rate (LPR) decision, particularly the one-year LPR as a benchmark for new commercial loans and the five-year LPR guiding property loans, which will directly impact financing costs and market liquidity in the Chinese economy.
- Mixed Performance in Asia-Pacific: Hong Kong's Hang Seng index futures fell to 26,869, below the previous close of 27,081.91, while South Korea's KOSPI dropped 1.1%, indicating market concerns over economic outlook, despite Japan's Nikkei 225 rising by 0.77%.
- U.S. Market Impact: U.S. markets saw widespread declines on Monday, with the Dow Jones Industrial Average dropping 1.66% and the Nasdaq Composite falling 1.13%, reflecting investor fears over AI potentially disrupting software companies, further affecting sentiment in the Asia-Pacific region.
See More
Nvidia's AI Empire: Future Outlook and Growth Potential
- Significant Revenue Growth: Nvidia generated over $130 billion in revenue last year, marking a 114% year-over-year increase, which highlights its strong market demand and profitability in the AI sector, with gross margins consistently exceeding 70%, providing a solid foundation for future investments.
- Market Valuation Decline: Currently, Nvidia's price-to-earnings ratio has dropped to 24x, its lowest level in nearly a year, and historical data indicates that when the stock was similarly undervalued last year, it surged 90% over six months, suggesting a potential rebound opportunity.
- Data Center Sales Outlook: CFO Colette Kress stated that Nvidia is on track to exceed its $500 billion sales forecast for data center products, indicating sustained strong demand in the AI hardware market, which could lay the groundwork for future performance growth.
- Long-Term Growth Potential: While the stock may not double as it did last year in the short term, Nvidia's leadership in AI and evidence of customer support suggest that investors holding the stock for several years are likely to see substantial returns.
See More
US Stocks Plunge as Trade Policy Concerns Emerge
- Market Decline: On Monday, the S&P 500 Index fell by 1.04%, the Dow Jones Industrial Average dropped by 1.66%, and the Nasdaq 100 Index decreased by 1.21%, reflecting risk-off sentiment triggered by uncertainty over U.S. trade policy.
- Tariff Increase: President Trump signed an executive order raising global tariffs from 10% to 15%, a move that could curb global economic growth and negatively impact the stock market, particularly as it faces existing pressures.
- AI Risk Impact: A report from Citrini Research detailing potential risks of artificial intelligence on the global economy led to declines in software and payment stocks, with Datadog and Atlassian seeing drops of over 11% and 10%, respectively, indicating market concerns over tech stocks.
- Economic Data Highlights: Despite the stock market downturn, the U.S. January Chicago Fed National Activity Index rose by 0.39 to 0.18, surpassing expectations, suggesting that the economic fundamentals remain strong and may provide support for a future market rebound.
See More
Nvidia Stock Stagnates but Outlook Remains Positive
- Significant Revenue Growth: Nvidia generated over $130 billion in revenue over the past year, reflecting a 114% year-over-year increase, which indicates strong performance in the AI sector and sustained market demand, despite recent stock stagnation, the company's profitability remains robust with gross margins exceeding 70%.
- Cautious Market Expectations: Although Nvidia's stock has reached a forward P/E ratio of 24, its lowest in nearly a year, investor concerns about the economy and the AI market persist, which may impact future stock performance, especially ahead of the upcoming earnings report.
- Strong Demand for Data Center Products: CFO Colette Kress stated that Nvidia is on track to exceed its $500 billion sales forecast for data center products, reflecting ongoing demand for its critical GPUs and solidifying its leadership position in the AI market.
- Historical Performance Suggests Potential: Historical data shows that when Nvidia's stock was at low levels, it climbed 90% over six months, suggesting a potential rebound from current prices, although the market remains cautious about rapid growth, the long-term growth potential still exists.
See More
