Michael Burry has a fresh Substack post, and the man who predicted the 2008 housing crash thinks the AI boom is starting to look familiar.
"Absolutely non-stop AI. Nobody is talking about anything else all day," Burry wrote Friday after a long drive listening to financial coverage. He compared the current run to "the last months of the 1999-2000 bubble."
The Philadelphia Semiconductor Index, the main gauge for chip stocks, has gained 65% so far this year. More than 10 of those points came this week alone.
The S&P 500 also closed at a fresh record Friday, even after consumer sentiment hit an all-time low earlier the same day.
That gap is what Burry zeroed in on. "Stocks are not up or down because of jobs or consumer sentiment," he wrote. "They are going straight up because they have been going straight up. On a two letter thesis that everyone thinks they understand."
Paul Tudor Jones, one of the most respected hedge fund managers alive, said something similar on CNBC's Squawk Box this week. Today's setup feels like 1999 to him, about a year before the dot-com bust.
Jones is still long the rally, and he thinks it could keep going another year or two. But he warned about what comes after.
"Just imagine the stock market went up another 40%," Jones said. "There'll be some... breathtaking kind of corrections."
The bear case isn't that AI is fake. It's that prices have run far ahead of the actual profits, the same setup that crushed tech stocks in March 2000.
Big chip makers and AI-linked plays have driven most of the index's gains over the past two years, with buzz around new AI tools lifting the whole sector.
The catch: When the leaders of a rally start to look stretched on the same metrics, history says corrections move faster than people expect. The slide tends to start before the average buyer sees it coming.
For investors, that means the longer the rally runs, the bigger the gap between price and profit becomes. The bigger that gap, the harder the snap-back tends to be when it finally lands.
There's also a more basic point in Burry's note. When stocks stop reacting to actual data and just keep going up, that's a crowd story, not a math story. Crowd stories tend to end the same way.
Two of Wall Street's loudest contrarian voices are now flashing the same warning. The market keeps making new highs anyway.
Both things have been true before, and they didn't stay true forever. The next earnings season for big AI names will tell us whether the profits are actually catching up to the prices, or whether the gap is still widening.
