Michael Burry sounds the alarm again: the record S&P 500 harbors the threat of a crash similar to 1987
Legendary investor Michael Burry, who predicted the 2008 mortgage crisis, is again warning of a high probability of a massive crash in the U.S. stock market. In his view, the current record rally in the S&P 500 is not a sign of a sustainable bull trend, but a dangerous prelude to a scenario reminiscent of the "Black Monday" of 1987.
On Tuesday, the S&P 500 closed at an all-time high of 7,736.52 points, gaining 1.79%. The Nasdaq Composite also hit a record, rising 2.59% to 26,584.99 points. Growth drivers included strong corporate earnings and lower oil prices amid expectations of resumed shipping in the Strait of Hormuz. However, Burry sees this not as fundamental strengthening, but as signs of overheating.
Warning About the AI Bubble and the Fragility of the "Fundamentals"
In his latest blog post on Substack, titled "Trading Note August 4, 2026: My Options," Burry confirmed that he maintains short positions against a number of key companies tied to artificial intelligence, including Nvidia, Tesla, Palantir, Micron, and Applied Materials. He also holds a short on the sector ETF SOXX and Caterpillar stock. Notably, nearly all of these bets are currently profitable, except for the position against Nvidia.
The analyst warns that demand for AI infrastructure is largely supported by cash flows that could dry up. He makes this statement just a few days after his June 30 warning about the "AI bubble." According to his logic, new index highs often attract fresh capital, and falling volatility pushes algorithmic funds to increase leverage, which only amplifies the system's fragility.
"I still believe the market is near the top, and I do not rule out a decline in the spirit of 1987. However, new highs in the S&P 500 will most likely lead to an influx of new funds," Burry wrote.
Nvidia — A Key Test for the Bearish Scenario
The losing short position on Nvidia will be a serious test for Burry's forecast as early as August 26, when the company presents its financial results. The overwhelming majority of Wall Street analysts still recommend buying Nvidia stock. Burry himself acknowledges a willingness to limit losses if the situation turns against him.
My expert view: The analogy with 1987 is a powerful rhetorical device, but it is important to remember that the crash then was preceded by a long period of growth with extremely low volatility. Today's market, fueled by capital concentration in tech giants, is indeed vulnerable, but the speed and depth of a correction will depend on how quickly investors begin to take profits. For now, the influx of new funds into index funds continues to support the illusion of stability. Watch volatility behavior and liquidity flows — these will be the early indicators of a reversal.