Michael Burry, the investor known for predicting the 2008 financial crisis, has warned investors to reduce exposure to surging technology stocks, citing historically dangerous market extremes. In a recent Substack post, Burry urged investors to 'reject greed' as enthusiasm around artificial intelligence and momentum-driven trades pushes valuations sharply higher. He specifically advised reducing positions in stocks that are 'going parabolic almost entirely.'
Burry has been warning for months that the stock market's AI fixation increasingly resembles the final stages of the dot-com bubble. Last week, he compared the recent trajectory of the Philadelphia Semiconductor Index (SOX) to the run-up that preceded the collapse of technology stocks in March 2000. He described the current environment as feeling like 'the last months of the 1999-2000 bubble.'
The investor maintains a significant leveraged short position against a portfolio of companies he views as depressed and cheap, a strategy similar to the one he employed in 2000. However, he cautioned that directly betting against the rally through short-selling is risky and impractical for most investors, particularly as bearish trades have become increasingly expensive. 'Shorting is not the answer. It is not something most people should ever do,' Burry said. 'Right now it is expensive, in general, to buy put options and directly shorting stocks can still cause significant pain.'
Burry's comments add to a growing debate on Wall Street over whether the AI-driven rally in U.S. equities has become detached from fundamentals. Major stock indexes have repeatedly hit record highs despite the ongoing war in the Middle East as investors pile into semiconductor makers and megacap companies. 'The idea is to raise cash, and prepare to put it to work when it makes more sense to do so,' he wrote.
In a separate post, Burry warned that the market decline he has been predicting is finally close. He pointed to the blistering tech rally and raised concerns about valuations, stating that the market environment looks similar to that of the months leading up to the dot-com bust. 'The end of…this…is nigh,' he wrote. Burry speculated that the conflict with Iran, the recent surge in oil prices, or a potential contagion event in private credit could all be triggers for a coming decline.
The Nasdaq 100 has surged 16% in the last month alone, while the iShares Semiconductor ETF is up 65% year-to-date, marking one of its best-ever rallies. According to an analysis from BTIG, the top 10 performers in the Nasdaq 100 were up an average of 784% over the past year, compared to the average 622% gain across the top 10 performers in the year leading up to March 2000.