Big Short’s Burry Warns NASDAQ’s P/E Ratio of 43 Times: “Betting on a 30% Decline in Semiconductors” — Like the Minutes Before a Car Crash, the .com Bubble Is Coming

“The Big Short” investor Michael Burry issued a warning on May 8th in his Substack “Cassandra Unchained”: the Nasdaq 100 index’s price-to-earnings ratio has reached 43, far exceeding his estimated fair value of 30. The Philadelphia Semiconductor Index has surged nearly 70% since the end of March; Burry compares the current situation to “the last few minutes before a bloody car crash.” On the same day, the S&P 500 hit a new all-time high, creating a stark contrast. If his prediction proves true, Bitcoin, which is highly correlated with the Nasdaq, may face downward pressure in tandem.

(Background: In “The Big Short,” Burry liquidated all his GameStop holdings and criticized the $56 billion eBay acquisition as “over-leveraged and insufficiently protected by interest coverage.”)

(Additional context: After two years of silence, Burry warns again of a bubble: sometimes the best move is to not participate.)

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• P/E ratio at 43, Wall Street overestimates earnings by 50%
• Chip stocks are the epicenter: SOX up nearly 70% in three months
• Burry’s specific positions: SOXX put options and a billion-dollar short on Palantir
• He himself says: don’t short stocks
• What happens to the crypto market if the bubble bursts?

On May 8th, the S&P 500 reached a new all-time high again, and the market was celebrating—yet on the same day, Michael Burry, the star of “The Big Short,” issued a warning on his paid Substack “Cassandra Unchained”: tech stocks are soaring in a “parabolic” manner toward an unsustainable peak, reminiscent of the dot-com bubble burst. He directly compares the current scene to “the last few minutes before a bloody car crash.” After major media outlets like Bloomberg extensively covered this on May 11th, it became one of the most talked-about warnings of the week.

P/E ratio at 43, Wall Street overestimates earnings by 50%

According to Burry’s own estimates, the Nasdaq 100 index’s current P/E ratio is about 43, well above his perceived “reasonable level” of around 30. He points out that the root of this bubble-like valuation is: “Wall Street’s earnings forecasts for the fastest-growing, highest-valuation companies are overestimated by a full 50%.” In other words, market expectations for profits from AI-related stocks have become severely detached from reality. Once earnings season begins to digest these discrepancies, the revaluation of these stocks could be much more intense than most expect. Meanwhile, the Shiller CAPE P/E ratio hit 40.1 on May 8th, approaching the peak levels seen during the 2000 dot-com bubble, a rare high in history.

Chip stocks are the epicenter: SOX up nearly 70% in three months

Burry specifically highlights the recent “parabolic” move in chip stocks. The Philadelphia Semiconductor Index (SOX) has surged approximately 67.95% from its low point on March 30th to May 8th, with a daily high reaching 11,776.74 points; over the past month, it gained 38.57%, and over the past year, an astonishing 164.97%. This rally is led by AI infrastructure giants like Nvidia and TSMC. However, Burry warns that such rapid vertical acceleration is the most alarming sign—mirroring the pattern seen in Nasdaq during the late 1999-2000 bubble, almost identical in shape.

Burry’s specific positions: SOXX put options and a billion-dollar short on Palantir

His warnings are not just words; Burry has established corresponding positions. He bought put options on the iShares Semiconductor ETF (SOXX) expiring January 2027, with strike prices far below the current level, betting on a roughly 30% decline from the current high. At the same time, he maintains a nearly $1 billion nominal short position on Palantir (PLTR), holding 2026 December $100 puts and 2027 June $50 puts. Notably, in April, Burry proposed the “Anthropic Displacement” thesis on Cassandra, believing that Anthropic’s Claude enterprise version is rapidly replacing Palantir’s enterprise market position—one of the key catalysts for his bearish bet on PLTR.

He himself says: don’t short stocks

The paradox is that Burry simultaneously warns investors—not to short stocks directly. He explains that options are expensive, and timing the bubble top is extremely difficult; rushing in could lead to significant losses if the timing is off (the so-called “short squeeze”). His strategy is to use long-dated options positions, giving himself ample time for the market to reality-check, rather than betting on a short-term timing. This also means that even if his directional view is correct, he might still suffer from “option decay” losses before the bubble actually bursts.

What happens to the crypto market if the bubble bursts?

This warning is not just relevant for stock investors. Over the past two years, the 30-day rolling correlation coefficient between Bitcoin and Nasdaq 100 has often exceeded 0.7, indicating they almost move in lockstep in risk appetite. If Burry’s prediction comes true and AI-related stocks collapse first, the immediate chain reaction could be a decline in institutional risk appetite, leading to a sell-off in crypto assets as well, with BTC and ETH facing liquidity crunches. However, the opposite scenario is also worth considering: if Nasdaq drops more than expected, forcing the Fed to pivot back to easing or even emergency rate cuts, history shows that crypto assets tend to rebound fastest after liquidity is reintroduced. The key difference between these two paths lies in whether the crash happens so quickly that the central bank cannot respond in time. At this moment, Burry’s warning at least reminds crypto investors that when AI narratives and on-chain valuations are still highly intertwined, the bubble risk in the stock market is never just distant noise to ignore.