SynopsisLegendary investor Warren Buffett once dubbed Michael Burry, famous for predicting the 2008 housing crisis, as 'Cassandra' for his accurate but initially ignored warnings. Now, Burry is sounding the alarm on a potential AI bubble, citing massive tech spending and rising debt. He sees parallels to the Dotcom crash, suggesting current market optimism might be detached from economic reality, leading him to place bearish bets on several major companies.ETMarkets.comLegendary investor Warren Buffett once famously nicknamed Michael Burry, best known for correctly predicting the 2008 housing crisis, as 'Cassandra' as he compared him to the Trojan priestess in Greek mythology who was cursed to deliver true prophecies that no one believed.Just before the 2008 financial collapse, people believed that the US housing market was secure and booming, and that home prices would not fall. Banks increasingly issued subprime loans, riskier mortgages were given to borrowers with weaker credit, under the assumption that rising prices would shield them from losses. Despite the misplaced optimism, Burry voiced his opinion that the market was on the brink of collapse, which most people did not believe, almost like Cassandra’s prophecy.Michael Burry's 2008 financial collapse prophecyAfter tirelessly studying mortgage securities, he concluded that subprime loans would collapse by 2007, taking down the broader economy with them. In 2005 and 2006, he warned his clients in letters that the meltdown was coming — but almost no one believed him. Against all odds, Burry bought credit default swaps against subprime mortgage securities, effectively betting that the market would crash. As premiums mounted, investors grew furious and demanded withdrawals, forcing Burry to restrict redemptions in his fund in order to hold the positions. The backlash was so intense that it nearly destroyed his firm — until the market finally collapsed exactly as he predicted. Burry made around $100 million personally and $725 million for investors when the housing market finally collapsed.Burry in an old post on social media had said that Buffett named him Cassandra during a Financial Crisis Inquiry Commission hearing in 2010, calling him one of the ignored voices who warned of the housing collapse. “Cassandra, as Warren Buffett called me during his testimony to Congress about the GFC, is unchained,” Burry wrote on his substack page.Also read: AI bubble won't tell you who's naked till the tide goes out. Warren Buffett explained why 25 years agoWhat this says about the AI bubbleBuffett’s nickname for Michael Burry stemmed from his response to the 2008 financial crisis. But the 'Big Short' investor's warning over artificial intelligence continues to spook today's investors.The tech giants are massively increasing their spending on AI to take a lead in what they describe as the next big tech revolution. While the enterprises keep on integrating AI, Burry has been sounding the alarm over the rising debt levels as a result of the massive spending.Earlier this year, Burry wrote on a Substack post that he sees many indicators, both technical and fundamental, lining up for the same conclusion as the Dotcom crash. "1999 went where no market had gone before, and I would say so can this one...It is already there on a number of indicators," he said, arguing that massive venture capital flows, rising AI debt issuance, and extreme market optimism are creating conditions where valuations may detach from economic reality.Burry recently announced that he has placed bets against Tesla, Caterpillar, Nvidia, Applied Materials and more, in what marks his latest series of bearish bets. He earlier also bet against Palantir and other companies.Notably, Burry’s popular bet against the housing market was depicted in the 2015 movie titled ‘The Big Short’ which cast Christian Bale, Ryan Gosling, Steve Carell and others.Also read: Warren Buffett's net worth is $169 billion, but the ace US investor still lives in the house he bought for $31,500 over 70 years ago(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. 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