Main character prototype of the big short: The AI boom closely resembles the internet bubble! Reduce holdings in tech stocks; short selling is not recommended.

“The Big Short” protagonist Michael Burry warns that the current AI-driven tech stock rally has formed a speculative bubble, similar to the pre-2000 internet bubble.

The character Michael Burry (Michael Burry), the real-life inspiration for the movie “The Big Short,” recently issued a stern warning about the stock market’s AI craze. He believes that the current surge in tech stocks driven by artificial intelligence (AI) has pushed the market into an extremely dangerous speculative bubble, closely resembling the period just before the 2000 dot-com crash. Burry urges investors to “reject greed,” reduce their holdings as much as possible, and increase cash reserves to prepare for potential market collapse.

AI frenzy resembles internet bubble? Burry: Reduce holdings in parabolic stocks

According to CNBC, Michael Burry pointed out that the current market environment has reached a historic extreme high. He stated that investor enthusiasm for AI and the influx of massive capital into free markets are driving stock valuations to unreasonable levels. Burry bluntly said that the simplest way to reduce risk is to “cut down holdings, especially in tech stocks,” and emphasized that investors should consider nearly liquidating positions in stocks exhibiting “parabolic” growth.

He further analyzed that the recent trend of the Philadelphia Semiconductor Index (SOX) closely matches the trajectory before the dot-com bubble burst in March 2000. In Burry’s view, the current market sentiment is very similar to the last few months before the 1999-2000 bubble burst.

Not recommending retail investors to short! Too risky and unrealistic

Although Burry is extremely bearish on the market’s outlook, he specifically reminds retail investors not to attempt “short selling” recklessly. He revealed that he maintains a set of leveraged short positions targeting undervalued, low-priced companies, but this strategy is too risky and impractical for most people.

Burry states, “Shorting is not a cure-all, nor is it something the average person should do.” He explains that the cost of borrowing stocks to short is currently high, and the premiums for put options are also quite expensive. During strong bullish sentiment, directly shorting individual stocks can easily lead to severe losses.

Burry claims “US stock valuations are disconnected from fundamentals”: Hold cash and wait for the right entry point

As the debate on whether the AI rally has diverged from fundamentals intensifies on Wall Street, major US indices continue to hit record highs despite Middle East conflicts, with capital flowing into semiconductors and large-cap stocks.

Burry believes that the top priority now is to “increase cash reserves” and be prepared to enter the market when prices fall back to reasonable levels. He concludes that historical experience shows that even if this party lasts for another week, a month, or even a year, the ultimate outcome will be a significant correction in prices. Investors should stay calm now and avoid being blinded by greed at the peak of the bubble.

• This article is reprinted with permission from: “Chain News”
• Original title: “The Big Short Burry: AI Boom Similar to 2000 Internet Bubble, Investors Should Increase Cash Reserves”
• Original author: Co2