Michael Burry warns: The AI stock rally is like the late months of the 1999-2000 bubble

According to Investopedia, in a report dated May 12, investors Michael Burry, who is known for predicting the 2008 real estate market crash, published multiple posts on Substack over the weekend, saying that the recent rally in AI-related stocks “feels like the last few months of the 1999-2000 bubble,” and advising to “trim positions in stocks that are rising in a parabolic way.”

Burry’s specific warnings and action recommendations

According to Investopedia’s report, in his Substack article on Sunday, Burry cautioned investors that “at the moment, the cost of buying put options is generally high, and shorting stocks directly could still lead to significant losses”; he suggested reducing risk by cutting positions and selling shares that have surged, rather than taking short-selling actions.

Burry wrote in the article: “Stock market moves have nothing to do with employment or consumer confidence. They’re rising all the way because they’ve been rising all along. And it’s all based on a simple theory that everyone thinks they understand.” He also wrote: “History tells us that even if this frenzy lasts a week, a month, three months, or even a year, the end result will be a significant reduction in prices. The key is to raise cash so that you can put it to use at a more appropriate time.”

Market data warnings from Bespoke and Renaissance Macro

According to Investopedia’s report, a Bespoke Investment Group report showed that chip stocks’ trading prices were 33% above their 50-day moving average on Monday, noting that this level had only appeared three times before: December 1998, March 2000, and November 2002.

Renaissance Macro CEO Jeff DeGraaf told clients last week that the Philadelphia Semiconductor Index (SOX) triggered a warning signal that has only appeared three times in the past 30 years (1996, 2000, and 2022). DeGraaf said that bubbles “don’t issue alarms at the top,” and that “the right move is to wait for the market to worsen, sell during the decline process, rather than sell during the rally process.” He added that the current scenario could correspond to three historical cases: 1996 (early bubble stage), 2000 (before the bubble top), or 2022 (a sign of a mild pullback), but it is currently not possible to confirm which one it is.

SOX Index and recent gains in chip stocks

According to Investopedia’s report, the Philadelphia Semiconductor Index (SOX) has risen nearly 70% since late March through Monday’s close; in the past roughly one and a half months, the share prices of Intel (INTC) and Micron Technology (MU) have risen by about three times and one time, respectively. On Tuesday, after a report showing a surge in April inflation was released, chip stocks led the decline of the broader market.

FAQ

What channel and timing did Michael Burry use to issue the AI bubble warning?

According to Investopedia’s May 12, 2026 report, Burry published multiple posts on Substack, including a Friday post (saying the market “feels like the last few months of the 1999-2000 bubble”) and a Sunday post (advising to almost completely reduce holdings in stocks that are rising in a parabolic way).

What specific strategy recommendations did Burry make for AI stocks?

According to Investopedia’s report, Burry recommended trimming stocks that are rising parabolically, while warning that the cost of shorting is high and the risk is large; he argued for raising cash so it can be deployed when future opportunities arrive, rather than shorting directly now.

What specific data warnings did Bespoke and Renaissance Macro provide?

According to Investopedia’s report, Bespoke said that chip stocks were 33% above the 50-day moving average (previously only seen in December 1998, March 2000, and November 2002). Renaissance Macro CEO Jeff DeGraaf said that the SOX triggered a warning signal that has appeared only three times in 30 years (1996, 2000, and 2022).