Michael Burry warns stock market crash worse than 2000 dot‑com surge — AI valuations fuel risk
Michael Burry warns the U.S. stock market could face a crash worse than the 2000 dot‑com bubble. The veteran investor says several tough years may be ahead for investors. He points to the surge in AI and tech stock valuations, combined with the dominance of passive investing, as key risks.
Burry, known for predicting the 2008 housing crisis, has issued crash warnings in multiple years, such as 2019, 2021, and 2022, often citing market bubbles in stocks, indexes, and real estate. Recent discussions reference his ongoing pessimism, with some noting he hinted at collapses via investments like private prison stocks amid expected turmoil.
Burry says more than half of U.S. equity assets are now in index funds and ETFs. That means fewer active investors are analyzing individual companies. Without active capital, the market has less of a safety net. In a downturn, losses could amplify quickly, and recovery may take longer.
He highlights Nvidia, Palantir, and other AI-heavy names as particularly risky. These companies have soared not because of profits but due to AI hype and speculative trading. Burry compares today’s environment to the late 1990s internet boom but says it is even more extreme. The excitement around AI is driving stock prices far above sustainable earnings.
Accounting practices make matters worse. Many tech firms are stretching depreciation on AI hardware. This reduces expenses on paper and inflates reported profits. When the real costs hit, earnings could fall sharply. Investors may be underestimating the risk, thinking profits are stronger than they really are.
Burry has acted on his warnings. He shut down his hedge fund to avoid risking outside capital in the current environment. In his personal portfolio, he has taken bearish positions on major AI and tech companies, signaling he expects sharp sell-offs. His moves highlight his confidence in the structural fragility of the market.
The warning is not about timing. Burry doesn’t predict a crash on a specific day. Instead, he signals systemic vulnerabilities. The combination of passive investing, inflated tech valuations, and distorted accounting could trigger a market correction. Even sectors usually considered stable may feel the impact due to the market’s interconnectedness.
Investors are urged to stay alert. Diversification, caution in high-growth AI stocks, and understanding market structure are key. Burry’s history — including his 2008 call before the housing crash — shows his warnings carry weight. While a crash is not guaranteed, the risks today are higher than in many previous cycles.
In short, Michael Burry’s warning is a wake-up call. The U.S. stock market may be entering a period of prolonged volatility. Passive capital, speculative AI valuations, and hidden accounting risks create conditions for a severe downturn. Smart investors will heed the warning, monitor exposure, and prepare for possible turbulence ahead.
Michael Burry's claim of an impending market crash worse than the 2000 dot-com bubble is supported primarily by his observations of several macroeconomic and financial distress signals, though the evidence is more about patterns and warning signs than concrete timing.
Key evidence includes:
High levels of layoffs, foreclosures, auto repossessions, and debt collections, indicating economic stress in consumer and credit markets, which are often precursors to broader market declines.
Burry and others note parallels between current financial conditions and those leading to the 2008 crisis, particularly around failures in corporate governance and risk management at major financial institutions.
Despite government efforts to delay or soften downturns, underlying bubbles remain inflated, especially in equities and AI-related technology stocks, creating systemic vulnerabilities.
Burry's investment moves, such as short positions on AI stocks like Nvidia and bets against subprime-like instruments, reflect his conviction in an overvalued, fragile market.
Analysis of historical precedents shows recurring cyclical crashes, and Burry's thesis is that unresolved fundamental risks and excessive speculative behavior have built towards a large-scale correction.
Critics caution Burry's timing has often been early, and while his rationale on market excesses is respected, precise crash timing remains uncertain.
With so much money parked in passive vehicles, there are fewer active investors carefully analyzing individual companies. That, Burry argues, removes the market’s natural safety net. When corrections happen, there is less capital ready to stabilize prices.
He warns that this structure can amplify losses. “When the market goes down,” he says, “the whole thing is just going to come down.” Unlike in 2000, there may not be enough active investors to absorb shocks or rotate capital into undervalued opportunities.
Burry believes this makes today’s market structurally fragile. Even small negative events could trigger outsized reactions. Investors may be more exposed to volatility than they realize.
Despite the bubble signals, the sector shows stronger fundamentals than past speculative eras. Hyperscalers including AWS, Microsoft, Google, and Meta plan a combined $315 billion in 2025 capex for AI infrastructure, driving chip and processor demand expected to expand from $43.7 billion in 2024. Many AI chipmakers report real revenue from customers like Alphabet and Meta, with gross margins projected at 63–64% and competitive moats far stronger than dot-com-era firms.
Still, valuation risks are clear. Nvidia’s price-to-book ratio now surpasses any stock from the dot-com bubble period, and the Nasdaq 100’s price-to-sales multiples have climbed back toward 1999–2000 peak levels. During the dot-com era, more than 100 companies traded above 25x P/S; the market is again approaching similar counts of extremely high-multiple tech names. AI-focused firms also face pressure as heavy capex requirements strain cash flows even though many carry limited debt.
Broader tech valuations, however, remain more disciplined than during past peaks. Software sector multiples, which hit 6x EV/Revenue in 2021, normalized to about 2.0x EV/Revenue and 17.6x EV/EBITDA by mid-2025 as investors refocused on fundamentals. Today’s elevated levels are driven mainly by a few mega-cap AI firms, while much of the sector trades at more moderate valuations. This creates a split market: pockets of extreme valuations equal to or worse than 2000 in leading AI names, but a broader tech landscape that shows healthier and more sustainable multiples.
By understating costs, companies can appear more profitable than they actually are. Burry warns that when the real costs hit — for example, when hardware becomes obsolete — earnings could fall dramatically.
This kind of accounting distortion makes investors think companies are safer than they truly are. If multiple tech giants face similar issues at once, the potential for a major market correction grows.
Burry’s point is clear: inflated profits can mislead even experienced investors, masking underlying risks in the market.
In his personal investments, he has placed bearish bets on AI and tech stocks, including major names like Nvidia and Palantir. He expects that these sectors may experience sharp declines in the near future.
By taking these steps, Burry is signaling confidence in his market outlook. For investors, it’s a reminder to review their exposure to high-risk sectors and consider potential hedging strategies.
Burry emphasizes caution but not panic. His moves are calculated and highlight the risks without creating unnecessary alarm.
Burry, known for predicting the 2008 housing crisis, has issued crash warnings in multiple years, such as 2019, 2021, and 2022, often citing market bubbles in stocks, indexes, and real estate. Recent discussions reference his ongoing pessimism, with some noting he hinted at collapses via investments like private prison stocks amid expected turmoil.
Burry says more than half of U.S. equity assets are now in index funds and ETFs. That means fewer active investors are analyzing individual companies. Without active capital, the market has less of a safety net. In a downturn, losses could amplify quickly, and recovery may take longer.
He highlights Nvidia, Palantir, and other AI-heavy names as particularly risky. These companies have soared not because of profits but due to AI hype and speculative trading. Burry compares today’s environment to the late 1990s internet boom but says it is even more extreme. The excitement around AI is driving stock prices far above sustainable earnings.
Accounting practices make matters worse. Many tech firms are stretching depreciation on AI hardware. This reduces expenses on paper and inflates reported profits. When the real costs hit, earnings could fall sharply. Investors may be underestimating the risk, thinking profits are stronger than they really are.
Burry has acted on his warnings. He shut down his hedge fund to avoid risking outside capital in the current environment. In his personal portfolio, he has taken bearish positions on major AI and tech companies, signaling he expects sharp sell-offs. His moves highlight his confidence in the structural fragility of the market.
The warning is not about timing. Burry doesn’t predict a crash on a specific day. Instead, he signals systemic vulnerabilities. The combination of passive investing, inflated tech valuations, and distorted accounting could trigger a market correction. Even sectors usually considered stable may feel the impact due to the market’s interconnectedness.
Investors are urged to stay alert. Diversification, caution in high-growth AI stocks, and understanding market structure are key. Burry’s history — including his 2008 call before the housing crash — shows his warnings carry weight. While a crash is not guaranteed, the risks today are higher than in many previous cycles.
In short, Michael Burry’s warning is a wake-up call. The U.S. stock market may be entering a period of prolonged volatility. Passive capital, speculative AI valuations, and hidden accounting risks create conditions for a severe downturn. Smart investors will heed the warning, monitor exposure, and prepare for possible turbulence ahead.
Could passive investing make the next crash worse?
Burry says one of the biggest changes in the market today is the overwhelming dominance of passive investing. Index funds and ETFs now hold more than half of all U.S. equity assets.Michael Burry's claim of an impending market crash worse than the 2000 dot-com bubble is supported primarily by his observations of several macroeconomic and financial distress signals, though the evidence is more about patterns and warning signs than concrete timing.
Key evidence includes:
High levels of layoffs, foreclosures, auto repossessions, and debt collections, indicating economic stress in consumer and credit markets, which are often precursors to broader market declines.
Burry and others note parallels between current financial conditions and those leading to the 2008 crisis, particularly around failures in corporate governance and risk management at major financial institutions.
Despite government efforts to delay or soften downturns, underlying bubbles remain inflated, especially in equities and AI-related technology stocks, creating systemic vulnerabilities.
Burry's investment moves, such as short positions on AI stocks like Nvidia and bets against subprime-like instruments, reflect his conviction in an overvalued, fragile market.
Analysis of historical precedents shows recurring cyclical crashes, and Burry's thesis is that unresolved fundamental risks and excessive speculative behavior have built towards a large-scale correction.
Critics caution Burry's timing has often been early, and while his rationale on market excesses is respected, precise crash timing remains uncertain.
With so much money parked in passive vehicles, there are fewer active investors carefully analyzing individual companies. That, Burry argues, removes the market’s natural safety net. When corrections happen, there is less capital ready to stabilize prices.
He warns that this structure can amplify losses. “When the market goes down,” he says, “the whole thing is just going to come down.” Unlike in 2000, there may not be enough active investors to absorb shocks or rotate capital into undervalued opportunities.
Burry believes this makes today’s market structurally fragile. Even small negative events could trigger outsized reactions. Investors may be more exposed to volatility than they realize.
Are AI and tech stocks creating a dangerous bubble?
AI and tech stocks are trading at elevated valuations that fuel fresh bubble concerns. Nasdaq Composite’s forward P/E sits at 29.28, far above its long-term average of 23.48 and higher than the S&P 500’s 24.35, with much of tech relying on rapid, AI-driven earnings acceleration. AI startups in 2025 funding rounds are commanding median EV/Revenue multiples of 25–30x, far exceeding traditional SaaS norms, while major AI names like Nvidia trade at levels analysts increasingly view as stretched relative to fair-value estimates.Despite the bubble signals, the sector shows stronger fundamentals than past speculative eras. Hyperscalers including AWS, Microsoft, Google, and Meta plan a combined $315 billion in 2025 capex for AI infrastructure, driving chip and processor demand expected to expand from $43.7 billion in 2024. Many AI chipmakers report real revenue from customers like Alphabet and Meta, with gross margins projected at 63–64% and competitive moats far stronger than dot-com-era firms.
Still, valuation risks are clear. Nvidia’s price-to-book ratio now surpasses any stock from the dot-com bubble period, and the Nasdaq 100’s price-to-sales multiples have climbed back toward 1999–2000 peak levels. During the dot-com era, more than 100 companies traded above 25x P/S; the market is again approaching similar counts of extremely high-multiple tech names. AI-focused firms also face pressure as heavy capex requirements strain cash flows even though many carry limited debt.
Broader tech valuations, however, remain more disciplined than during past peaks. Software sector multiples, which hit 6x EV/Revenue in 2021, normalized to about 2.0x EV/Revenue and 17.6x EV/EBITDA by mid-2025 as investors refocused on fundamentals. Today’s elevated levels are driven mainly by a few mega-cap AI firms, while much of the sector trades at more moderate valuations. This creates a split market: pockets of extreme valuations equal to or worse than 2000 in leading AI names, but a broader tech landscape that shows healthier and more sustainable multiples.
Could accounting tricks hide the real risks?
Burry also highlights worrying practices in accounting for AI and tech infrastructure. Many companies are stretching depreciation timelines for expensive AI hardware. This reduces short-term expenses and inflates reported profits.By understating costs, companies can appear more profitable than they actually are. Burry warns that when the real costs hit — for example, when hardware becomes obsolete — earnings could fall dramatically.
This kind of accounting distortion makes investors think companies are safer than they truly are. If multiple tech giants face similar issues at once, the potential for a major market correction grows.
Burry’s point is clear: inflated profits can mislead even experienced investors, masking underlying risks in the market.
What is Michael Burry doing personally?
Burry has taken steps based on his own warnings. He recently closed his hedge fund, citing the risks of managing outside capital in the current market. This move shows how seriously he views the potential for a selloff.In his personal investments, he has placed bearish bets on AI and tech stocks, including major names like Nvidia and Palantir. He expects that these sectors may experience sharp declines in the near future.
By taking these steps, Burry is signaling confidence in his market outlook. For investors, it’s a reminder to review their exposure to high-risk sectors and consider potential hedging strategies.
Burry emphasizes caution but not panic. His moves are calculated and highlight the risks without creating unnecessary alarm.
