On Monday, “Big Short” investor Michael Burry, known for his high-profile bet against the U.S. housing market, said that today’s artificial intelligence surge, led by Nvidia Corp (NASDAQ:NVDA), could follow a boom-and-bust pattern similar to the 1920s radio craze.
AI Boom Compared To RCA’s Historic Collapse
Burry over the weekend drew parallels between the current AI frenzy and the speculative surge around Radio Corporation of America nearly a century ago.
“In the 1920s there was radio mania focused mostly on one stock, RCA,” Burry wrote on X.
He noted the company’s shares plunged roughly 98% during the early 1930s — even though radio technology continued expanding for decades.
“Even if you predicted a half century of radio dominance, you would have lost money on RCA,” he added, tagging Nvidia.
Semiconductor heavyweight Nvidia is set to release its fourth-quarter financial results on Wednesday after the closing bell.
RCA’s Historic Rally And Collapse
In the 1920s, RCA’s stock price surged roughly 200-fold — one of the most dramatic run-ups in market history.
But after peaking in 1929, the shares unraveled, plunging from 114.75 in September 1929 to 2.625 by May 1932 — a staggering 98% drop, noted Finaeon, formerly Global Financial Data.
Over time, RCA clawed its way back, eventually surpassing its 1929 high. Following a 3-for-1 stock split, the shares traded at 66 before the company was ultimately acquired by General Electric in 1986.
Data Center Spending Under Fire
Earlier in the day, Burry also questioned whether massive AI-related capital expenditures can continue without hurting corporate balance sheets.
He called out companies including Microsoft Corp (NASDAQ:MSFT), Meta Platforms, Inc. (NASDAQ:META), Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL) and Amazon.com, Inc. (NASDAQ:AMZN), asking, “When does the spending for AI data center buildout actually end?”
He argued that AI infrastructure investments are consuming cash flow and increasing borrowing.
“You are borrowing, you are financing in ways you never have,” Burry wrote, questioning whether companies are adjusting accounting practices to cushion earnings pressure.
Bubble Or Balance-Sheet Risk?
Earlier, Burry cautioned that the AI rally could be heading toward a sharp reversal. He voiced concerns that the current tech surge resembles past corporate spending battles that failed to deliver lasting competitive advantages.
He aimed at companies such as Microsoft and Alphabet, arguing that their aggressive investments in AI infrastructure risk becoming outdated sooner than expected.
To illustrate his point, Burry referenced Warren Buffett’s experience with Hochschild-Kohn, a department store that invested heavily in upgrades but ultimately failed to differentiate itself from rivals.
He suggested a similar dynamic could play out in AI, where rapid competitive catch-up erodes any edge gained from massive spending.
Price Action: Nvidia shares were up 0.91% and gained another 0.19%, according to Benzinga Pro.
NVDA shows a solid price trend across the short, medium and long term, though it carries a weak value rating, according to Benzinga’s Edge Stock Rankings.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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