Michael Burry sounds the alarm again: record S&P 500 and the risk of a crash in the spirit of 1987
Legendary investor Michael Burry, who predicted the 2008 mortgage crisis, is again warning of an impending correction in the U.S. stock market. In his view, the current all-time highs of the S&P 500 index are not a reason for euphoria, but a signal of a possible repeat of the 1987 crash scenario.
On Tuesday, the S&P 500 index rose 1.79%, closing at 7,736.52 points, setting a new historical record. The Nasdaq Composite jumped 2.59%, reaching a new high of 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 remains skeptical. In his latest Substack post titled "Trading Note August 4, 2026: My Options," he confirmed that he holds short positions against Nvidia, Tesla, Palantir, and other companies tied to artificial intelligence. He believes that demand for AI infrastructure is sustained solely by cash flows that could dry up at any moment.
"I still believe the market is near its peak, and I do not rule out a decline in the spirit of 1987. However, new highs in the S&P 500 index will most likely lead to an influx of new funds," Burry wrote. He added that fresh historical peaks often attract retail investors, while falling volatility forces algorithmic funds to increase leverage, which only heightens the system's fragility.
Nvidia — Burry's Only Losing Bet
Interestingly, almost all of Burry's short positions — against the iShares Semiconductor ETF (SOXX), Micron, Caterpillar, Palantir, Tesla, and Applied Materials — are profitable. The only exception is his bet against Nvidia, which is currently losing money. The key test will be Nvidia's earnings report on August 26: nearly all analysts still recommend buying the company's shares.
Burry himself admits he is ready to limit losses if the situation turns against him. How justified the analogy with the 1987 crash is will be shown by the influx of new money into the market and volatility behavior in the coming weeks.
My comment: Burry is known for his conservative and often bearish outlook, and his warnings should be taken seriously, especially in conditions where the market is overheated due to the AI frenzy. However, it is important for investors to remember that even the most accurate forecasts do not negate the need for diversification and risk management — the market can remain irrational longer than a short seller has capital.