Michael Burry has been locking horns with AI bulls like Elon Musk and Alex Karp, but Gavin Baker says he's thankful for Burry's thoughtful critiques of the latest tech boom.
"I'm so grateful to Michael Burry," the managing partner and chief investor of Atreides Management said during the latest episode of the "Generating Alpha" podcast. "His Substack, it's a godsend."
Baker, an early investor in Tesla, SpaceX, and Nvidia, described Burry as a "really smart, intelligent guy who's making a really credible bear case every day."
"We want that," he continued. "We want a really smart person who's credibly banging a bearish drum."
Burry, the investor of "The Big Short" fame, pivoted from running a hedge fund to writing about his personal portfolio on Substack late last year.
He's warned that Big Tech companies are spending too much on AI equipment such as Nvidia microchips and data centers, creating a capital-spending bubble that will burst if demand falls short of expectations.
On the podcast, Baker showed he's no stranger to Burry and another leading bear, GMO cofounder Jeremy Grantham. He echoed the pair by saying that revolutionary technologies have historically sparked bubbles as buzz and speculation take hold, leading to overbuilding and an eventual crash.
Baker said that "if you look at everything — canals, railroads, radio, the internet, PCs — you would think we will have an AI bubble."
He said that as a value-conscious investor, that prospect is a "disaster" and a "nightmare" that nobody wants. But he said the market is "obviously not in a bubble," as tech valuation multiples are broadly the same as they were five or six years ago, and have compressed since the start of last year.
Baker also said he's not worried about overbuilding because the "scars are so deep " from the dot-com bubble that they've "kept a lid on tech valuations," and constraints on electricity supplies and microchip production will limit the buildout.
"So I'm optimistic and hopeful that watts, wafers, and scars of the internet bubble keep a true bubble from happening because that's the enemy of every long-term investor," he said.
Baker might value Burry's bearish commentary because it reminds investors of those scars and the risks they're running, helping to stave off a bubble.
Baker and Burry didn't immediately respond to requests for comment from Business Insider.