Investor Michael Burry, known widely through The Big Short, has issued another bearish warning on U.S. equities, saying the market may be nearing a major top even as the S&P 500 keeps hitting record highs. In a Substack post published Tuesday, Burry said the current rally could be feeding on itself: lower volatility may prompt volatility-targeting funds to add leverage, while momentum strategies may also raise risk exposure, sending more money into the market.
The recent strength in equities has been supported by stronger-than-expected corporate earnings and a drop in oil prices tied to expectations for resumed shipping through the Strait of Hormuz. The Nasdaq Composite has gained nearly 5% across the first two trading days of this week.
Burry also kept up his criticism of the AI investment boom. He argued that parts of today’s AI infrastructure buildout rely on financing models that may be hard to sustain over time. He said he still holds several short positions, including bets against a semiconductor ETF, Nvidia, Micron, Tesla, Caterpillar, Palantir and Applied Materials. According to Burry, all of those shorts except Nvidia are currently profitable, though he said he would cut losses if market action continues to move against him.
Michael Burry, the investor known from The Big Short, has renewed his bearish warning on the U.S. stock market, saying the market may be close to a major top despite fresh record highs in the S&P 500. He also said a sharp sell-off similar to the 1987 crash cannot be ruled out.
Burry says the rally may be reinforcing itself
In a Substack post on Tuesday, Burry wrote that the advance in stocks may be turning into a self-reinforcing mechanism. As volatility falls, volatility-targeting funds may increase leverage. Momentum strategies may also add risk exposure, a move that could keep capital flowing into the market.
The latest highs in the S&P 500 have been driven mainly by stronger-than-expected corporate earnings and lower oil prices linked to expectations that shipping through the Strait of Hormuz will resume. The Nasdaq Composite has climbed nearly 5% over the first two trading days of this week.
Still skeptical of the AI trade
Burry has not backed away from his criticism of the AI investment boom. He said part of the current spending on AI infrastructure depends on financing models that may be difficult to sustain over the long term.
He said he continues to hold several short positions, including a semiconductor ETF, Nvidia, Micron, Tesla, Caterpillar, Palantir and Applied Materials. Burry added that all of those shorts except Nvidia are currently profitable. If market conditions continue to move against him, he said he would stop out and exit.
He also warned that short selling is not suitable for most investors, writing, "I must short, most people should not try."
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