Michael Burry Warns of the Risk of a Serious Decline in the US Stock Market Due to the AI Boom
Renowned financier Michael Burry, who predicted the 2008 mortgage crisis, has expressed concerns about the future of the US stock market. In his view, the market may face a crash that could surpass the scale of the “dot-com crisis” at the end of the 1990s.
This is reported by AgroReview
Threats from an Overheated AI Company Market and Passive Investments
Burry links the potential downturn to the overheating of the sector involving artificial intelligence companies, as well as structural changes in investment behavior. According to him, AI corporation stocks are showing growth that does not align with their fundamental indicators. Often, prices are formed based on inflated expectations rather than stable earnings. The financier notes that the current multiples of several issuers exceed even the highest levels of the late 1990s.
“Stocks of corporations related to artificial intelligence are rising faster than their fundamental indicators. Some companies are showing overvaluation based on expectations rather than sustainable earnings.”
The expert paid particular attention to passive investments. According to Burry, index funds and ETFs currently control more than half of the US stock market. He believes that such a structure reduces the share of active analysis, which could amplify negative consequences in the event of market stress.
Financial Risks and Changes in Investment Strategy
Among other reasons for concern, Michael Burry mentioned the extension of depreciation periods for AI equipment used by several technology companies. In his assessment, this affects reported earnings and may distort the actual financial situation in businesses.
He also reported that he has adjusted his own investment strategy: he closed his hedge fund to avoid attracting outside capital and established bearish positions against major companies focused on artificial intelligence. Through these actions, Burry demonstrates distrust in the current market structure and warns of the likelihood of increased volatility in the near future.
Despite this, the financier emphasizes that he does not provide specific forecasts regarding the timing of a potential crash. His warnings pertain to systemic factors — the overvaluation of certain segments, the characteristics of capital flows, and risks that investors may underestimate when forming their portfolios.