Renowned financier Michael Burry, who gained fame for his accurate prediction of the 2008 mortgage crisis, has stated that a significant crash in the U.S. stock market could occur, potentially surpassing the scale of the dot-com bust of the late 1990s.
This is reported by Finway
Overvaluation of AI-Related Companies
Burry noted that the stocks of companies involved in artificial intelligence are experiencing rapid growth that outpaces their actual financial performance. In his view, many businesses are being valued based on future expectations rather than actual profitability, creating risks for the market. He drew parallels to the situation at the end of the 1990s, emphasizing that the current valuation ratios of many issuers exceed the levels observed before the dot-com crash.
Impact of Passive Investments and Structural Changes in the Market
Additionally, Burry highlighted the role of passive investments, noting that index funds and ETFs currently control over half of the U.S. equity market. This structure, he believes, reduces the share of active analysis of companies, which could exacerbate asset value declines during stressful periods.
“Burry also expressed concern that some tech companies are extending the depreciation periods for AI equipment, affecting reported earnings. He warned that such practices could distort the actual financial stability of businesses.”
Furthermore, the investor indicated that he has already adjusted his investment strategy. He closed his hedge fund to avoid attracting outside capital and has taken bearish positions on major tech companies focused on artificial intelligence.
The authors of the material emphasize that Burry’s actions signal a potential for high volatility in the market in the near future. At the same time, the financier himself noted that he does not provide a specific forecast regarding the timing of a crash, and his warnings pertain to systemic factors—overvaluation of certain segments, the structure of capital flows, and underestimated profitability risks. He urged investors to consider these factors when forming their own portfolios.