Fortune reports:

“It’ll happen slowly, and then all at once.”

That’s how Jim Morrow, founder and chief investment officer of Callodine Capital, describes the eventual – inevitable – unwinding of what he calls “the most crowded trade in history.”

Of course, he isn’t just paraphrasing Ernest Hemingway—he’s talking about the AI race, and the trillion-dollar deals so overstretched they’re better described as knots than trades. And he’s not alone in sounding alarms.

Michael Burry—the investor of Big Short fame who famously predicted the 2008 housing collapse—broke a two-year silence this week to say nearly the same thing: that Big Tech’s AI-era profits are built on “one of the most common frauds in the modern era”—stretching the depreciation schedule (some, including Burry, would say cheating the depreciation schedule).

And it landed with extra weight: earlier this week, Burry quietly deregistered his investing firm, Scion Asset Management, effectively stepping away from managing outside money or filing public disclosures. Some analysts interpreted the move as less of an ominous sign and more, as Bruno Schneller, managing director at Erlen Capital Management, told CNBC, stepping away “from a game he believes is fundamentally rigged.” [Continue reading…]