‘Big Short’ investor, Michael Burry, has warned that a big threat to the AI boom is lurking in private credit.
Writing on his Substack, Burry said there’s a growing risk of problems in AI-linked debt securities which have become more prevalent in the private credit universe.
Burry added that he sees problems among private-equity owned insurers and the illiquid credit instruments they have amassed in recent years. He shared a paper on the trend of PE firms acquiring insurance companies and loading them up with asset-backed securities and the potential risks to the economy that this carries with it.
"Those asset-backed assets and structured securities are increasingly coming off data center and chip leases," Burry wrote on his Substack.
"This is where the possible contagion takes down the economy - by withdrawing funding for the data center buildout, which is also an increasing part of United States economic growth."
Burry has repeatedly called the AI market a bubble this year, and announced short bets against some of the tech sector's most prominent names.
