Michael Burry is sounding the alarm. The legendary investor who called the 2008 financial crisis now warns that US equities are setting up for a catastrophic selloff reminiscent of October 1987, when the market dropped 22% in a single day. His timing is awkward. The S&P 500 just posted a 1.79% gain Tuesday to hit 7,736.52, while the Nasdaq climbed 2.59% to 26,584.99, both new records.
The rally fed on stronger earnings and falling oil prices as shipping lanes through the Strait of Hormuz look ready to reopen, easing energy supply fears. But Burry isn't buying the cheerfulness. He argues that AI infrastructure spending, which has fueled much of the recent gains, sits on quicksand. The entire boom depends on companies keeping their capital flowing and cash positions healthy. Tighten those conditions, he says, and the entire AI complex crumbles.
His concern goes deeper than just one sector. Record highs pull fresh money into equities. At the same time, low volatility lets algorithmic and systematic funds pile on use, creating what Burry sees as a powder keg. One sharp move down could trigger forced selling across the board. He's been flagging this risk since June, when he compared the AI valuation sprint to a classic bubble.
Burry remains short a handful of stocks riding the AI wave. He holds bearish bets against Nvidia, Tesla, Palantir, Micron, Caterpillar, Applied Materials, and the iShares Semiconductor ETF. Most trades are printing money. Nvidia is the exception, still underwater despite his conviction. That bet faces a key moment when Nvidia reports earnings on August 26. Wall Street analysts remain firmly bullish, with the chipmaker continuing to dominate AI infrastructure demand. A strong quarter could push Burry's Nvidia short into deeper losses.
The S&P 500 ticked up 0.3% in early Wednesday trading.
