Big short seller Burry: The AI boom is similar to the 2000 internet bubble—investors should raise their cash levels

The protagonist of the movie 《The Big Short》, the character prototype Michael Burry, has once again issued a stern warning about the stock market’s AI boom. He believes the current rally in tech stocks driven by artificial intelligence (AI) has pushed the market into an extremely dangerous speculative bubble, even highly similar to the period right before the dot-com bubble burst in 2000. Burry urged investors to “refuse greed,” reduce their holdings as much as possible, and increase their cash levels to deal with the risk of a potential crash.

(After Nvidia surged higher, what is the actual potential loss amount for the Big Short prototype character Michael Burry?)

Is AI frenzy really similar to the dot-com bubble? Burry: reduce exposure as individual stocks follow a parabolic trend

According to a CNBC report, Michael Burry said the current market environment has reached a historical extreme. He noted that investors’ frenzy for AI and the massive capital pouring into the free market are pushing stock market valuations to unreasonable levels. Burry said bluntly that the simplest way to reduce risk is to “cut back on holdings, especially tech stocks,” and emphasized that for stocks whose prices are rising in a “parabolic” fashion, investors should consider nearly clearing out positions.

He further analyzed that the recent trend of the Philadelphia Semiconductor Index (SOX) closely matches the path before the dot-com bubble burst in March 2000. In Burry’s view, the market mood now is just like the last few months before the bubble explosion from 1999 to 2000.

(The Big Short Burry is bearish on semiconductors—expect a 30% drop; switches to buy beaten-down software stocks)

Not recommended for ordinary investors to short! Risk is too high and unrealistic

Despite being extremely bearish on the outlook, he specifically reminded ordinary investors not to rashly try “short selling” (Short selling). He said that although he maintains a leveraged short position targeting low-priced and undervalued companies, this strategy is too risky and unrealistic for most people.

Burry said: “Short selling is not a cure-all, and it’s not something the average person should do.” He explained that the cost of securities lending for short selling in the current market is high, and the prices protected by buying put options (Put options) are also quite expensive. In a strong bull-market atmosphere, directly shorting individual stocks can easily lead to severe losses.

Burry said that U.S. stock market valuations are “detached from fundamentals”: keep cash and wait for the right time to enter

As debate on Wall Street about whether the AI rally has detached from fundamentals grows more intense, major U.S. stock indexes still ignore the Middle East conflict and keep hitting record highs, while capital continues flowing into semiconductors and large-cap value-weighted stocks.

Burry believes the top priority now is to “increase cash levels,” and be prepared to enter when prices pull back into a reasonable range. He concluded that historical experience tells us that even if this party can last for a week, a month, or even a year, the end result will inevitably be a major price correction. Investors should stay calm now and avoid being blinded by greed at the peak of the bubble.

(Alphabet places a century bond bet on AI; The Big Short Burry warns: fear of repeating in the footsteps of Motorola)

This article, 《The Big Short》 Burry: the AI boom looks like the dot-com bubble of 2000, investors should raise cash levels, first appeared on Chain News ABMedia.