Legendary investor Michael Burry, known for predicting the 2008 crisis, is once again warning about a possible systemic collapse of the American stock market. In his opinion, the upcoming decline may exceed the scale of the dot-com bubble of 2000.
Revaluation of the technology sector and AI companies
Berry points out that the valuations of leading technology corporations and AI startups are significantly detached from actual financial indicators. Capitalization growth is occurring mainly through hype, not profitability. A potential decline in interest in AI could cause a sharp correction in a sector where excessive optimism is already priced in.
Dominance of passive funds as a systemic risk
More than half of the American stock market is now controlled by passive ETFs and index products. This means a reduction in the share of active investors who can take on the role of dampening panic and correcting pricing. According to Berry, this market structure increases vulnerability to sudden imbalances.
Signs of a new 'AI bubble' forming
Companies like Nvidia or Palantir are showing significant growth not due to proportional fundamental progress, but because of speculative interest. Berry compares this to historical phases of bubbles, where investors' faith in a 'new economy' pushes real indicators to the background.
Lack of transparency in financial reporting
The investor notes an increase in instances where companies adjust accounting methods and presentation of financial results in a way that maintains the illusion of stability. Such practices have preceded previous market crises.
Ignoring classical economic laws
Berry draws parallels with previous overheating cycles. The market is once again forming a belief that fundamental economic rules have stopped working, while history shows the opposite. A change in sentiment combined with excessive capital concentration in certain sectors can provoke a prolonged downturn.
Potential consequences
According to Berry, in the event of a trend reversal, the market may enter a prolonged downturn phase, lasting longer than previous corrections. This is not about a short-term pullback, but a cyclical decline that could last for years.