The stock market’s been on a remarkable run in 2026. US indices, including the S&P 500, are hitting fresh all-time highs, AI stocks are surging, and investor optimism is in full swing. But not everyone’s celebrating.
Michael Burry – the hedge fund manager immortalised in The Big Short for calling the 2008 housing collapse – has just issued one of his starkest warnings yet. Should investors listen?
What exactly is Burry warning?
On 8 May, Burry posted a characteristically blunt message on Substack. In his words, 2026 is “Feeling like last months of the 1999-2000 bubble.”
The comparison’s deliberate. He sees the current AI-driven frenzy as the final, euphoric stage of a bubble rather than the beginning of a sustainable rally. And specifically, his focus is on semiconductor stocks.
The Philadelphia Semiconductor Index has surged around 65% in 2026 alone. And Burry’s reportedly purchased put options on the iShares Semiconductor ETF expiring in January 2027, betting on an expected decline of roughly 30% between now and then.
That’s not just talk. It’s a financial commitment. And it isn’t entirely without merit.
Looking at the Shiller CAPE ratio (a measure of overall stock market valuations), the S&P 500 currently stands at 41.7. That’s the highest it’s been since the dotcom bubble, where it reached as high as 44.2 before the market collapsed.
Should investors actually be worried?
Here’s the thing. Burry’s track record beyond 2008 is patchier than his reputation suggests. And repeated crash calls throughout the last decade have caused investors who listened to miss out on some extraordinary gains.
But that doesn’t mean the warning should be dismissed entirely. The AI narrative’s dominant, valuations are stretched, and consumer sentiment recently hit a record low on the same day the S&P 500 hit a fresh high. That disconnect’s worth noting.
The smarter approach isn’t to panic. Instead, investors should use the warning as a prompt to assess whether the stocks driving the rally are genuinely worth owning at today’s prices.
Let’s look at an example
Burry previously shorted Nvidia (NASDAQ:NVDA) directly in 2025. He has now done so again indirectly through his semiconductor ETF, of which Nvidia’s a constituent.
Yet the chipmaker continues to deliver staggering earnings growth, with data centre revenues rising over 400% year-on-year. Demand from hyperscalers such as Microsoft, Amazon, and Google shows no sign of abating, and Nvidia’s next-generation Blackwell architecture is already selling out quarters in advance.
However, with a forward price-to-earnings ratio of 26.5, investors are pricing Nvidia as if it will continue to dominate. The only trouble is that isn’t guaranteed. Hyperscalers are actively searching for cheaper alternatives from rivals including AMD or making their own in-house versions to bring down the cost of building AI infrastructure.
In other words, the gravy train could indeed eventually come to an end. And that shouldn’t be a major surprise given the cyclicality of the semiconductor sector.
However, when this slowdown might happen is the ultimate question. And right now, even investors as smart as Burry don’t know the answer for certain.
Personally, I think a gradual correction is more likely than a sudden crash. But there are nonetheless still plenty of other interesting opportunities for investors to explore.
Should you invest £5,000 in Nvidia right now?
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And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Nvidia made the list?
Zaven Boyrazian does not hold any positions in the companies mentioned.
