Michael Burry, the guru of 'The Big Short', sees a new financial disaster: the tech rally resembles the dot-com bubble of 2000

Michael Burry, an investor who became famous for predicting the collapse of the U.S. housing market depicted in the film The Big Short, has expressed strong concerns about the current state of U.S. stock markets, particularly in the tech sector and AI-related stocks.

According to Burry, the recent rally of the NASDAQ 100 has taken on "parabolic" characteristics, closely resembling the dynamics observed during the dot-com bubble that peaked in 2000. In his commentary published on Substack, the investor argues that current valuations have reached levels that are difficult to sustain in the long term.

One central element of his analysis pertains to the semiconductor sector. The Philadelphia Stock Exchange Semiconductor Index has reportedly increased by nearly 70% since the end of March, largely fueled by a wave of AI investments from Big Tech firms. Companies like Alphabet and Amazon are, in fact, significantly increasing their spending on AI infrastructure, contributing to the enthusiasm of investors.

Burry believes that the NASDAQ 100 is currently trading at multiples that are too high compared to actual earnings. According to his calculations, the index has reached a price-to-earnings ratio of about 43 times, against an implied level that he considers more realistic at around 30 times. In his view, Wall Street is overestimating the future earnings growth of large-cap tech companies by over 50%.

The investor also pointed out that the rally is involving a relatively limited part of the market. Analysts at Sundial Capital Research highlight that this is only the fourth time in history that the S&P 500 reaches new highs while just 5% of the index's stocks are at 52-week lows. This data, according to various observers, could indicate a strong concentration of growth among a few high-cap stocks.

The behavior of the semiconductor index is also being closely monitored. Data collected by Bespoke Investment Group shows that the Philadelphia Semiconductor Index has diverged from its 200-day moving average in a manner comparable only to two other historical periods: July 1995 and March 2000, right at the peak of the Internet bubble.

Despite the concerns, Burry has stated that he does not find it sensible to take aggressive bearish positions through put options, considering them too expensive and risky in a phase of high volatility. The investor has nevertheless maintained a significant leveraged short position against a portfolio of companies he considers undervalued, without specifying names.

In his message to investors, Burry primarily urges taking profits after the strong rally of recent months and reducing overall exposure to the stock market, with particular attention to tech stocks. According to the analyst, even if the rally were to continue for weeks or months, the final phase could still lead to a sharp reduction in valuations.

The macroeconomic context is also characterized by additional elements of uncertainty. In addition to the rush to invest in artificial intelligence, geopolitical tensions and fears of a possible resurgence of inflation related to energy prices are weighing on the markets. A scenario that could increase market volatility in the coming months.