Famed “Big Short” investor Michael Burry isn’t letting go of his bearish views towards Wall Street.
“The stock market is quite obviously in its first stage of grief, denial,” Burry recently wrote on X. “Per 2000 and 2008, this stage lasts 6-9 months.”
Must Read
-
A single line on your car insurance policy could be inflating your premium by up to 30% — here’s what to change
Burry’s comments emphasize his pessimistic views on the stock market, even as major financial indexes keep ascending to new heights on the back of eye-popping AI-related spending from the tech sector. Such a prediction coming true would mean financial market turmoil setting in during the first or second quarter of 2027.
On Oct. 6, the S&P 500 reached 7,830 points, a record high on the heels of a 0.7% increase from the prior day. It previously set the record for the 28th time this year alone on Aug. 13.
The 2008 financial crisis was triggered by the collapse of the housing market once defaults had spread on risky subprime mortgages. In 2001, there was a brief recession brought on by a wave of speculative investing going bust in the dot-com boom. There was a stretch of remarkable financial and economic growth leading up to both of these recessions.
Burry’s contrarianism
Burry is most famous for betting against the American housing market in the run-up to the 2008 financial crisis. Since then, he’s taken positions against chipmakers Micron and iShares Semiconductor ETF, among other companies involved in the AI buildout.
“Fundamentally, I am moving timelines up,” Burry said in a recent investment newsletter. “As such, I want more leverage in my short positions. Better timelines make leverage more palatable.”
He said he replaced stock shorts with puts on his Nvidia, Palantir, and Micron positions that expire at fluctuating points next year. These three companies are key players in the AI boom.
Read More: Here’s the average income of Americans by age in 2026. Are you keeping up or falling behind?
For now, Wall Street has managed to shrug off inflation and bond market turmoil even as policymakers grow concerned about price hikes erasing Americans’ wage growth for much of this year.
Investors are also tracking whether the Federal Reserve will raise interest rates later this month for the second time this year, a step that would increase corporate and individual borrowing costs across the economy.
A challenge to Burry
Burry has also said he believes the AI boom will sputter, arguing there’s a mismatch between rapid chip development and the long lifespan of a data center.
If the chip hardware is upgraded faster than a data center’s vast and costly infrastructure, it could leave hyperscalers on the hook for expensive overhauls that weren’t originally anticipated. Burry’s argument, though, has been challenged by Steve Eisman, another prominent “Big Short” investor.
“If AI succeeds because Anthropic and OpenAI grow like crazy, and the hyperscalers do well, it’s not going to matter if the depreciation schedule changed from three to four years to five to six years,” Eisman said in a recent episode of the New Money podcast, citing huge demand among hyperscalers even for the older chips.
Burry has also pointed out that hyperscalers leading the charge in the AI buildout have $3 trillion in financial commitments that aren’t reflected on their balance sheets. At least not yet, since accounting rules allow for corporate commitments on purchasing AI hardware to be kept off the books until the products are delivered.
What To Read Next
Get Warren Buffett’s best investing lessons, free. Join 250,000 readers getting Moneywise’s sharpest money reporting every week. Subscribe and we’ll send you our guide to the ideas that built Buffett’s fortune as a welcome gift.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
