Michael Burry, the investor best known for predicting the 2008 US housing market collapse, has renewed his bearish view on Wall Street, warning that the current rally in US equities could still end in a sharp sell-off similar to the 1987 stock market crash.
Burry, whose bet against the subprime mortgage market was documented in 'The Big Short', shared his latest views in a Substack post on Tuesday, even as the US benchmark S&P 500 and the Nasdaq Composite climbed to fresh record highs.
The S&P 500 rose 1.9 percent on Tuesday to notch its first record close since June, while the Nasdaq Composite gained 2.7 percent, extending its recent rally.
Despite the market's strong performance, Burry said he believes US stocks may be approaching a major peak.
"I continue to believe it is possible the markets are near a major top," Burry wrote, adding that a continued rise in the S&P 500 could attract even more money into equities before a potential reversal.
According to Burry, the rally is being driven by falling market volatility, which is encouraging systematic and volatility-targeting funds to increase their exposure to equities.
He said lower volatility forces such funds to take on more leverage, while momentum-driven strategies further amplify buying, creating a self-reinforcing cycle that could leave markets vulnerable if sentiment changes.
Burry said the build-up in leverage has increased the risk of a sharp correction similar to the 1987 stock market crash. On October 19, 1987, known as Black Monday, the Dow Jones Industrial Average (DJIA) plunged 22.61 percent, or 508.32 points, in a single trading session, ending a bull market that had lasted since August 1982. More than 604 million shares changed hands that day, about three times the daily average, while the New York Stock Exchange wiped out over US$500 billion in market value. The one-day decline remains one of the steepest in US stock market history and exceeded the DJIA's 12.8 percent fall during the 1929 Wall Street crash.
Burry has been one of Wall Street's most vocal critics of the artificial intelligence-led market rally. He has previously argued that demand for AI infrastructure is being supported by financing arrangements that may not prove sustainable over the long term.
Reflecting that view, he said he continues to hold short positions in several companies and exchange-traded funds, including Micron, Nvidia, the iShares Semiconductor ETF, Caterpillar, Tesla, Palantir and Applied Materials.
He said he remains confident in the long-term outlook for these bearish bets, although he is prepared to exit positions if they move decisively against him.
According to Burry, all of his short positions remain profitable except his bet against Nvidia.
He also cautioned that short selling is a high-risk strategy and not suitable for most investors.
Burry has repeatedly expressed concerns over elevated valuations in US equities, particularly stocks linked to the AI boom, even as investor optimism has continued to push major US indices to record levels.