""The measure to beat all measures is return on invested capital (ROIC), and ROIC was very high at these software companies. Now that they are becoming capital-intensive hardware companies, ROIC is sure to fall, and this will pressure shares in the long run," Burry wrote. AI, Burry said, is pushing companies like Microsoft, Google, and Meta away from their historically asset-light software models and toward a far more capital-intensive future defined by data centers, chips, and energy."
"Even if AI expands Big Tech's addressable market, he said, falling ROIC could pressure stock prices for years to come. Burry rose to fame after his bet against the mid-2000s housing boom was chronicled in "The Big Short." Outside the occasional cryptic social media post, Burry, for a long time, spoke publicly only rarely. That changed late last year when he closed his hedge fund to outside cash and began writing financial analysis on Substack."
Michael Burry identifies return on invested capital (ROIC) as the most important metric for AI industry investors and warns that ROIC for major software companies is declining. AI is shifting companies such as Microsoft, Google, and Meta from asset-light software models to capital-intensive operations requiring data centers, chips, and energy. Falling ROIC could pressure share prices for years even if AI expands addressable markets. Burry compares the AI boom to the late-1990s dot-com bubble and likens OpenAI to Netscape. Burry rose to prominence after betting against the mid-2000s housing boom and now publishes financial analysis on Substack.
Read at Business Insider
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