Since Michael Burry launched a Substack in November, he's been sharing plenty of investing insight, but he isn't the only "Big Short" trader who has something to say about the current market landscape.
Danny Moses, the former member of FrontPoint Partners, the firm led by Steve Eisman that successfully bet against the housing market in 2008, spoke to Business Insider about the potential problems he sees developing in the AI market and how he thinks investors should navigate the rapidly evolving space.
As the AI boom has unfolded, many finance pros have weighed two primary questions: Is there a bubble in the AI market, and if so, should it be compared to the dot-com era of the early 2000s?
Moses thinks the answer to both questions is yes. While he doesn't deny that the AI trade is real and a secular growth story, he also sees strong parallels between the two tech crazes that suggest investors need to tread cautiously.
"The growth was real, but the math didn't work," he said. "And I think that we're reaching a point where the math is starting not to work."
Moses emphasized that his take on potential AI market problems isn't a call to short the industry. Rather, he noted it's a call for investors to do their homework and find the right names to gain valuable exposure as the market continues to grow.
In his view, that means sticking with the tech sector's most dominant names that have the resources to continue scaling and aren't bound by the same constraints that some smaller companies are. The best examples include Amazon, Google, Meta, and Microsoft.
"They can turn down their capex at any point, and they're still cash flowing positive, as opposed to these other companies, which are dependent upon that spending within AI," he said.
Moses isn't bullish on all of Big Tech's top names, though. He cited Oracle as an example of problems within the AI market, noting the company's high debt levels and the cash that it will require the fulfill the orders from tech clients. He also highlighted volatile tech stocks Super Micro Computer and CoreWeave as examples of riskier plays within the AI trade.
In his view, though, investors are finally starting to account for the fact that not all AI stocks are created equal as the divide between relative outperformers and underperformers becomes increasingly hard to ignore.
"I think it's proof that investors are beginning to sort out the winners and losers of the trade, and they'd much rather have comfort and other businesses with stronger balance sheets to fall back upon to express the AI theme," Moses added.
He also said that he's bullish on uranium, as the metal is being increasingly touted as a key component of the AI buildout that will be necessary to sustain the industry in the coming years.
That said, he thinks the timeline for when it will start to spur growth is one that investors should be paying close attention to, as it is sometimes misunderstood amid the AI hype.
"One of the trades that I like is uranium, which thematically, should work, but it takes a long period of time," Moses said. "There's a mismatch in the timing of how people think that companies will experience AI growth and actually the infrastructure that it's going to take to power it."
