Michael Burry, the investor made famous by The Big Short, is standing by his bearish view, even as Wall Street continues to surge. With the S&P 500 hitting a record high, driven by a relentless AI-fuelled rally, Burry is refusing to join the optimism, saying the market could still face a sharp sell-off, much like the 1987 stock market crash.
“I continue to believe it is possible we are near a major top, and possibly a 1987-type fall, but the S&P 500 making new highs likely will bring new money into the market,” Burry said in a Substack post.
The S&P 500 jumped 1.9% Tuesday to its first record close since June. More than 80% of S&P 500 companies are beating analysts’ earnings expectations for the last quarter, according to LSEG data.
The Dow Jones Industrial Average rose 907.47 points, or 1.71%, to 54,085.88, and the S&P 500 gained 136.02 points, or 1.79%, to 7,736.52, each setting all-time closing highs. The Nasdaq Composite rose 671.10 points, or 2.59%, to 26,584.99.
Burry shorts Nvidia, Tesla, Palantir
Burry has been one of Wall Street’s biggest critics of the AI boom. He believes the rapid growth in spending on AI infrastructure is being supported by financing deals that may not last. According to him, the market’s advance is creating a self-reinforcing cycle, with declining volatility encouraging systematic investors to increase exposure.
“Remember, the market going up on falling volatility forces vol-targeting funds to leverage up, and brings leverage from other momentum strategies into play,” he wrote.
In the face of the rally, Burry said he continues to hold short positions in the iShares Semiconductor ETF (SOXX), Micron, Nvidia, Caterpillar, Palantir, Tesla and Applied Materials.
The investor said he remains confident in his long-term outlook for those positions, though he added that he would cut his losses if the trades moved decisively against him. All of the positions remain profitable except for his bet against Nvidia, he said.
“Again, shorting is not for everyone,” Burry wrote. “I must short. Most should not.”
