""It'll happen slowly, and then all at once." That's how Jim Morrow, founder and chief investment officer of Callodine Capital, describes the eventual - inevitable - unwinding of what he calls "the most crowded trade in history." Of course, he isn't just paraphrasing Ernest Hemingway -he's talking about the AI race, and the trillion-dollar deals so overstretched they're better described as knots than trades. And he's not alone in sounding alarms."
"Michael Burry-the investor of Big Short fame who famously predicted the 2008 housing collapse-broke a two-year silence this week to say nearly the same thing: that Big Tech's AI-era profits are built on "one of the most common frauds in the modern era"-stretching the depreciation schedule (some, including Burry, would say cheating the depreciation schedule). And it landed with extra weight: earlier this week, Burry quietly deregistered his investing firm, Scion Asset Management, effectively stepping away from managing outside money or filing public disclosures."
Jim Morrow characterizes the AI-investment boom as a crowded trade destined to unwind slowly then all at once. Michael Burry warns that Big Tech's AI-era profits rely on overstretched depreciation schedules, calling the practice a common modern fraud. Burry estimated that Big Tech will understate depreciation by $176 billion between 2026 and 2028, inflating reported profits by 26.9% at Oracle and 20.8% at Meta. Burry deregistered Scion Asset Management, stepping away from outside money and disclosures, and suggested the financial cycle around GPUs, data centers, and trillion-dollar AI bets is distorted, crowded, and fragile.
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