Michael Burry Warns Of A Complete Reversal Of Nasdaq 100: 'Scene Of The Bloody Car Crash, Minutes Before It Happens'

• Burry added that even if these parabolic rallies appear to have further upside, investors holding on are ultimately betting on their ability to exit at or near the peak.
• He stated that the Nasdaq 100’s real price-to-earnings ratio is closer to 43x than the 30x Wall Street touts.
• Burry also added that investors who have benefited from the massive run-up in high-momentum stocks should consider taking profits while gains remain elevated.

Michael Burry on Monday reiterated his warning about a potential AI bubble, stating that he expects a complete reversal of the Nasdaq 100 index from its current levels.

“The Big Short” investor stated in a Substack post that the Nasdaq 100 is currently trading at levels that are too good and too lucky to be real. “This, all of it, is the scene of the bloody car crash, minutes before it happens,” Burry said.

He added that even if these parabolic rallies appear to have further upside, investors holding on are ultimately betting on their ability to exit at or near the peak.

Burry Warns History Is Repeating Itself

Burry warned that history is repeating itself in the stock market and that it is not a good thing.

“In the next two days, I will release a valuation exercise that seems to suggest almost no tech stock, not even bombed out software stocks, are inexpensive when held to strict accounting standards, more strict and more forensic in nature than GAAP,” he said.

He also stated that the Nasdaq 100’s real price-to-earnings ratio is closer to 43x than the 30x Wall Street touts.

Beyond stock-based compensation, he said investors should also account for issues tied to depreciation practices, construction-in-progress spending, M&A expenses, capital leases, and other adjustments needed to determine true owner earnings rather than relying solely on GAAP net income.

“In addition, there are the future write-downs, such as Nvidia’s growing contracts with TSMC, securing over one hundred billion dollars of capacity at TSMC. CSCO in 2001 and 2002 wrote down years of its best earnings when it had to write off the same types of contracts with its suppliers,” Burry said.

Burry Recommends Investors Take Profits

Burry also added that investors who have benefited from the massive run-up in high-momentum stocks should consider taking profits while gains remain elevated.

He cautioned that short selling is not suitable for most investors, noting that put options are expensive. The investor said that directly shorting stocks can still be highly painful in the current market environment.

For most investors, however, he suggested reducing overall stock exposure, particularly to technology and high-momentum names experiencing parabolic rallies.

“History tells us that even if the party goes on for another week, month, three months, or year, the resolution will be to much lower prices,” he added.

Burry Adds Nvidia Puts

Burry stated last week that he has added to his Nvidia January 2027 puts at a strike price of $115 and March 2027 puts at a strike price of $125.

He also added to his QQQ puts for January 2027 at a strike price of $550, while loading up on SOXX short for January 2027 at a strike price of $330.

The Invesco QQQ Trust (QQQ) is up 16% year-to-date, while the iShares Semiconductor ETF (SOXX) is up 73%.

The Direxion Daily Semiconductor Bear 3X Shares ETF (SOXS) is down 87% during this period.

Also See: ASPI Stock Back In Focus Amid Race For Non-Russian HALEU Supply — Retail Points To Semiconductor Chip Opportunity

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