Michael Burry, the fund manager who famously bet against the mortgage bubble that imploded in 2008 and caused the demise of Lehman Bros., is sounding the alarm yet again.
Burry is warning that the Nasdaq 100 Index is on the cusp of a major downturn after a “parabolic” surge that propelled tech stocks into “unsustainable” heights, according to Bloomberg News.
In Burry’s substack, he said the market looks like the peak of the dot-com bubble before it crashed, in particular the steep rise of chip stocks that boosted the Philadelphia Stock Exchange Semiconductor Index by 70% since the end of March.
The index is trading at 43 times earnings, which is above the implied level of about 30 times, Burry said. He said that “Wall Street may be overstating by more than 50% the earnings at our fastest growing, most highly valued companies.”
“We are witnessing history. In the stock market, that is not a good thing,” Burry added. It resembles the scene of a “bloody car crash, minutes before it happens.”
Other market watchers have also voiced concerns about a stock market rally propelled by AI spending from Alphabet, Amazon, Meta and the like. The rally comes despite a war with Iran that has raised oil prices and could potentially slow economic growth.
Bespoke Investment Group data shows that the Philadelphia semiconductor index has risen this far above its 200-day moving average only twice before, in July 1995 and March 2000, at the dotcom peak, according to Bloomberg.
Burry advises taking profits from the recent rally and lowering exposure to tech stocks.