In his post on Substack, cited by Bloomberg, he paid particular attention to the sharp increase in shares of semiconductor companies, which caused the Philadelphia Semiconductor index to increase by almost 70 percent since the end of March.
According to Burry, the Nasdaq 100 is currently trading at 43 times earnings, well above the suggested 30 times. The investor noticed that Wall Street may overestimate the profit forecasts of the most dynamic companies by up to 50%. “We are witnessing history. This is not a good thing on the stock market” — he said, comparing the current situation to “a view of the scene of a bloody car accident a few minutes before the disaster.”
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Concerns about the tech bubble
Bloomberg points out that growing spending on the development of artificial intelligence, driven by giants such as Alphabet and Amazon, contributed to record levels of stock indices. However, analysts, including Jason Goepfert of Sundial Capital Research, point to worrying signs. Goepfert noted that the S&P 500 hit a record high and was only down 5%. companies included in it are at 52-week lows. This is a situation that has only been observed four times in history.
Data from Bespoke Investment Group shows that the Philadelphia semiconductor index has moved away from its 200-day moving average only in July 1995 and March 2000, moments that preceded the market crash.
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Investment strategy and warnings
Michael Burry, although he has short positions on selected companies, advises investors against betting on declines, pointing to the high costs of put options and the risk of losses due to poor timing. He admitted that he plans to withdraw from investments in companies that do not meet his strict valuation requirements. At the same time, he recommended taking profits after recent increases and limiting exposure to shares, especially in the technology sector.
“Even if it appears there is still time to rise, anyone fortunate enough to benefit from these parabolic moves without selling is betting on their own ability to break out at or near the top,” Burry wrote.
“History tells us that even if the event lasts another week, month, three months or a year, the result will be a much lower price level,” he added.
The investor emphasized that history shows the inevitability of declines after such periods of growth. “We are entering a rare zone so extreme that the consequences will be inevitable – no matter where anyone hides.” – he concluded.
