Michael Burry sounds the alarm again: is the record S&P 500 a trap before a crash?
Legendary investor Michael Burry, who predicted the 2008 mortgage crisis, is once again on the front lines. Against the backdrop of the S&P 500 index hitting an all-time high, rising 1.79% on Tuesday to 7,736.52 points, and the Nasdaq Composite setting a new record, climbing 2.59% to 26,584.99, Burry has publicly stated that a large-scale correction is inevitable. He believes the market is dangerously close to a peak and does not rule out a scenario reminiscent of the "Black Monday" of 1987.
In his latest analytical note, dated August 4, Burry confirmed that he holds short positions against key players in the AI sector, including Nvidia, Tesla, Palantir, and others. In his view, the current demand for artificial intelligence infrastructure rests on cash flows that could dry up at any moment. This statement is a logical continuation of his June warning about the "AI bubble."
The paradox of the situation is that Burry sees new highs not as a sign of strength, but as a catalyst for an influx of fresh funds that will only delay the inevitable. He emphasizes that declining volatility is causing algorithmic funds to increase leverage, making the system more fragile. "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 index will likely lead to an influx of new funds," he notes.
Betting on a Loss: Nvidia Remains the Only Losing Position
Notably, 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 the bet against Nvidia. This loss could be offset as early as August 26, when the company releases its quarterly report. Despite the fact that the vast majority of analysts maintain a "buy" rating for Nvidia shares, Burry is ready to limit losses if the situation turns against him.
My view: The analogy with 1987 looks frighteningly accurate, given the current level of margin debt and the concentration of growth in a narrow group of tech giants. However, as practice shows, the market can remain irrational longer than short sellers can remain solvent. The key signal is the behavior of volatility and the influx of liquidity: as long as they support the rally, the "bearish" forecast remains merely a warning, not a verdict.