The AI Bubble: CEO Warnings and 'Big Short' Bet Spark Global Tech Selloff
- Nov 6, 2025
- 3 min read
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A sharp, global selloff rattled markets on Wednesday, as a rout in technology shares dragged indexes down from Tokyo to Frankfurt and sent volatility to its highest level since April. The pullback from record highs, which began overnight in the U.S. and gathered pace across Asia, signals a definitive break in the market's relentless upward momentum, driven by a sudden, severe crisis of confidence in tech valuations.
The immediate catalyst for the downturn came not from an algorithm, but from Wall Street's most powerful voices. Speaking at the Global Financial Leaders’ Investment Summit in Hong Kong, the CEOs of Goldman Sachs and Morgan Stanley issued stark, public warnings. Goldman’s David Solomon predicted a "10% to 20% drawdown" is likely in the next 12 to 24 months, while Morgan Stanley’s Ted Pick agreed, stating markets should "welcome the possibility" of 10% to 15% corrections.
These comments landed on fertile ground: widespread, private anxiety over an AI bubble. After a massive, seven-month rally, analysts have warned that valuations reached "blue sky" territory, where any "small black cloud" could trigger a major reversal. Investors, as one strategist noted, are "up to their noses" in AI stocks. Morgan Stanley’s wealth management CIO, Lisa Shalett, explicitly advised clients to begin taking profits on "speculative and unprofitable equities" and move to "large-cap core and quality stocks."
Adding a powerful symbolic punch to the anxiety, it was revealed that Michael Burry—the investor famed for "The Big Short"—has turned his attention to AI. His firm placed a $1.1 billion bet against AI darlings Nvidia and Palantir, a move that crystallized fears that the industry's "super-high valuations," as one analyst told the BBC, are no longer justifiable.
The market’s mechanics were not one of panic, but of a "classic position-unwind." Strategists explained this was not a response to a single piece of news, but a herd-like shift in sentiment. With hedge funds and retail investors "extremely exposed" to tech, the first wave of profit-taking triggered a cascade. The impact was immediate: Japan's SoftBank, a major tech investor, plunged over 10%. Nvidia, which recently became the first company valued at $5 trillion, fell nearly 4%, while South Korea's Samsung dropped over 4%.
This tech-centric anxiety is being amplified by a gloomy macroeconomic backdrop. The chair of UBS warned of "looming systemic risk" in the opaque private credit market. Furthermore, two U.S. Federal Reserve officials cast doubt on a much-anticipated December rate cut, raising their "threshold" for easing. With an ongoing U.S. government shutdown forcing investors to "fly blind" without key economic data, the appetite for risk has evaporated.
Still, not everyone is predicting a crash. Some analysts remain "sanguine" about the medium-term outlook, pointing to a record $7.4 trillion in high-liquidity U.S. money market funds as a powerful support for markets. This, they argue, may simply be a "healthy correction" or a "breather" before a rotation into other sectors, rather than the beginning of the end.
CRUX
The global tech selloff is more than a simple dip; it's a cold reckoning with reality. Triggered by explicit warnings from top bank CEOs and validated by Michael Burry's bet against the sector, investors are rapidly unwinding positions built on the AI hype. Whether this is the "healthy correction" analysts hoped for or the start of the 20% drawdown Wall Street now predicts, the market’s "blue sky" scenario has definitively clouded over.
After a year of chasing the future, the market is suddenly forced to price in reality.
