Michael Burry Warns Of AI Debt Frenzy As 87% Of VC Funding Floods Sector — ‘Less Than 40%’ Went To Internet Companies During Dot-Com Era

• Burry also highlighted the risk of bonds becoming junk, drawing parallels to the bonds issued to tech, media, and telecom companies during the dot-com era.
• He stated that TMT startups accounted for roughly 80% of all venture capital funding in 1999.
• Burry added that by 2000, they also made up 40% to 50% of high-yield bond issuance and 25% to 30% of total investment-grade debt sales.

Michael Burry on Monday warned that the debt frenzy in the artificial intelligence sector may be drifting into bubble territory as capital pours into the sector at a pace exceeding the dot-com era.

“The Big Short” investor highlighted that 87% of venture capital funding is now directed toward AI companies, citing data from Apollo Global Management’s Chief Economist, Torsten Slok. He also noted that nearly half of all investment-grade bond issuance is going toward AI, while 38% of the high-yield bond issuance is linked to AI.

“During the internet boom, in 1999, less than 40% of VC funding was linked to internet companies,” Burry stated in a post on Substack.

Burry Highlights Risk Of Bonds Becoming Junk

Burry also highlighted the risk of bonds becoming junk, drawing parallels to the bonds issued to tech, media, and telecom (TMT) companies during the dot-com era.

He stated that TMT startups accounted for roughly 80% of all venture capital funding in 1999, and by 2000, they accounted for 40% to 50% of high-yield bond issuance and 25% to 30% of total investment-grade debt sales.

The investor added that more than $100 billion worth of investment-grade bonds issued during 1999 and 2000 were later downgraded to junk status by 2002.

“High yield debt at 38% today vs 40%-50% back then belies the idea that today’s AI debt issuance is cleaner, backed by more profitable companies today,” he said.

Burry Warns Of ‘SaaSpocalypse’

In a Substack post last week, Burry warned of a “SaaSpocalypse,” adding that software-as-a-service companies are downplaying the risks AI poses to their revenue models.

He pointed out that companies such as Salesforce, HubSpot, Snowflake, Workday, and ServiceNow came under heavy pressure heading into 2026, with the selloff accelerating after Anthropic introduced Agentic AI plug-ins that enabled Claude models to directly integrate with enterprise software platforms.

Burry also cautioned that investors are beginning to realize AI agents could eventually replace large portions of enterprise software workflows.

He also disclosed last week that he added to his Nvidia January 2027 puts at a strike price of $115, and March 2027 puts at a strike price of $125.

At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, fell 0.43%, while the Invesco QQQ Trust ETF (QQQ) declined 0.76%.

The iShares Expanded Tech-Software Sector ETF (IGV) is down 12% over the past 12 months, while the iShares U.S. Technology ETF (IYW) is up 48%.

Also See: TNGX Stock Crashes 20% After Reporting $0 Revenue In Q1 — But Analysts Still See Massive Upside

For updates and corrections, email newsroom[at]stocktwits[dot]com.