Michael Burry attends “The Big Short” New York screening Ziegfeld Theater on Nov. 23, 2015 in New York City.
Astrid Stawiarz | Getty Images
Michael Burry urged investors to scale back exposure to surging technology stocks, saying the current market environment has reached historically dangerous extremes reminiscent of prior speculative bubbles.
The famed investor, best known for predicting the 2008 housing collapse, said investors should “reject greed” as enthusiasm around artificial intelligence and momentum-driven trades pushes valuations sharply higher.
“An easier way for most is to simply reduce exposure to stocks, to tech stocks in particular. For any stocks going parabolic reduce positions almost entirely,” Burry wrote in a Sunday Substack post.
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, saying the current environment feels like “the last months of the 1999-2000 bubble.”
Burry said he is maintaining “a significant leveraged short position” against a portfolio of companies he views as depressed and cheap, a similar strategy he employed in 2000.
However, Burry warned 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,” he said. “Right now it is expensive, in general, to buy put options and directly shorting stocks can still cause significant pain.”
The 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,” Burry wrote. “History tells us that even if the party goes on for another week, month, three months or year, the resolution will be to much lower prices.”