"Big Short" renowned investor comments on AI: Comparable to the 1999–2000 Internet bubble

How should AI investors weigh Berry and Jones’s bubble warnings?

Source: Global Market Report

According to reports, the S&P 500 hit a new all-time high again on May 8, and on the same day, Berry issued a market warning on the subscription platform Substack.

He straightforwardly stated: “Stock market rises and falls are not determined by employment data or consumer confidence at all. The market keeps climbing solely supported by a two-letter theme that everyone thinks they understand. The current atmosphere is like the final crazy phase of the 1999-2000 bubble.”

He summarized the current market sentiment this way: “All day long, the topic is only AI, no one discusses anything else.” In Berry’s view, the market being completely dominated by a single theme is a typical characteristic of the late stage of a bubble.

It is worth noting that on the same day Berry issued his warning, the University of Michigan Consumer Confidence Index fell to a historic low, yet the U.S. stock market ignored the negative news and continued to rise.

Why Berry is closely watching the Philadelphia Semiconductor Index

The most specific point in Berry’s warning is the analogy he draws between the Philadelphia Semiconductor Index and the trend before the tech stock crash in March 2000.

Data shows that in the week ending May 8, the index surged over 10%, with a year-to-date increase approaching 65%. Its components include giants like Nvidia, Broadcom, Intel, Micron, and TSMC.

Berry believes this rapid surge replicates the parabolic rise of tech stocks at the end of the dot-com bubble, which was followed by a sharp decline.

Industry analysis firm Intellectia pointed out that the semiconductor ETF (SOXX) is currently trading about 60% above its 200-day moving average; historically, such a large deviation usually results in either a prolonged sideways consolidation or a significant correction.

According to Bloomingbit news, he has bought put options on the semiconductor industry ETF (SOXX) expiring in January 2027, with strike prices far below the current price, betting that the sector will roughly decline by 30%.

Shiller’s cyclically adjusted P/E ratio: valuations already at bubble highs

Berry’s bubble analogy is not based solely on subjective feelings.

Data from financial institution The People’s Economist shows that as of May 8, 2026, the Shiller CAPE (cyclically adjusted P/E ratio) reached 40.1, approaching the peak levels of the 2000 internet bubble. Historical patterns indicate that when the CAPE exceeds 35, the future ten-year inflation-adjusted annual return of U.S. stocks tends to be near zero or even negative.

But this does not mean a crash is imminent. Overvalued conditions can persist for a long time, especially when the market is driven by sentiment narratives and momentum rather than fundamentals. Nonetheless, this valuation metric provides solid data support for Berry’s bubble theory.

Paul Tudor Jones’s different judgment on the same topic

It’s not only Berry who compares the current situation to 1999.

Legendary investor Paul Tudor Jones also said last week in an interview that the current market atmosphere is very similar to 1999—about a year away from the tech stock peak in early 2000. But the two reach very different conclusions: Jones believes the current rally could continue for another one or two years.

This divergence of views is at the core of the current market debate:

Both refer to historical bubble cycles, but Berry believes we are in the final months of the bubble; Jones thinks there is still room for the market to go higher.

For ordinary investors, this disagreement is crucial:

If Berry’s timing is correct, reducing positions now could preserve gains; if Jones is right, holding for another year could still yield substantial returns before a correction occurs.

Berry’s past predictions: accurate but often early

Berry’s fame stems from a classic accurate prediction: he successfully foresaw the 2008 subprime mortgage crisis, a feat highlighted in Michael Lewis’s book The Big Short.

However, his subsequent warnings have received mixed reviews:

In 2021, he stated that Tesla was a bubble, as its stock price was far detached from fundamentals. Elon Musk mocked him as a “stalled clock,” but Tesla later declined sharply, and Berry retracted his bearish stance; in 2022, he warned of inflation risks and market fragility, which proved to be quite prescient.

Reviewing his forecasting style, it’s clear that he often diagnoses market ailments accurately but tends to be early on turning points.

This is the dilemma investors face with his May 8 warning: his bubble logic is probably correct, but no one can be certain when the correction will happen. For investors seriously considering his views, the key is not whether to believe him but how and when to act in the face of uncertain timing.