[Core Summary] Michael Burry, the “Big Short” famous for accurately predicting the 2008 financial crisis, has issued his latest warning that current markets may face crash risks similar to 1987’s “Black Monday.” His Scion Asset Management has established a short position on Nvidia, drawing widespread market attention. This warning comes as US stock valuations sit at historic highs.

Event Details

According to Quartz reports, Burry stated in his latest investor letter that current market structures share multiple similarities with pre-1987 crash conditions: excessive algorithmic trading concentration, heightened market concentration risk, and overly optimistic investor sentiment. He noted that AI-related stocks, particularly Nvidia, have reached “irrational exuberance” valuations.

Burry’s fund Scion Asset Management has filed 13F documents with the SEC showing put option positions on Nvidia. This marks Burry’s first public short of a single stock in recent years, having previously focused on macro hedge strategies.

Nvidia’s stock has risen over 180% this year, with market capitalization exceeding $3 trillion, making it one of the world’s most valuable companies. However, Burry believes this surge lacks fundamental support, particularly given that AI capital expenditure returns remain unverified.

Panoramic Perspective

Michael Burry’s warning draws significant market attention due to his track record of accurately predicting the 2008 subprime mortgage crisis. In 2005, when most analysts remained optimistic about the US housing market, Burry analyzed subprime mortgage data in depth and positioned early, ultimately earning billions for investors.

Current market parallels to 1987 do warrant caution. Before the 1987 crash, markets similarly experienced a prolonged bull market, with program trading (then called “portfolio insurance”) amplifying downward momentum. On October 19, 1987, the Dow Jones Industrial Average plummeted 22.6% in a single day, setting the record for largest single-day decline.

From a valuation perspective, the current S&P 500 Shiller PE ratio (CAPE) has exceeded 35x, second only to the 2000 internet bubble period. Market concentration risk is equally significant — over 70% of S&P 500 gains have come from the “Magnificent Seven” tech stocks. Such extreme concentration historically often signals correction risk.

However, the core trigger for the 1987-style crash was positive feedback loops from program trading. While algorithmic trading now comprises an even higher market share, regulatory mechanisms (like circuit breakers) have been significantly improved. The real risk may not lie in single-day crashes but in gradual valuation correction triggered by AI investment returns falling short of expectations.

Multiple Perspectives

Burry Supporters: Hedge fund manager David Tepper recently also stated “markets are in bubble territory,” reducing some tech positions. Bridgewater founder Ray Dalio warned that AI stock valuations embed overly optimistic growth expectations, and any earnings miss could trigger sharp corrections.

Counterarguments: Mainstream Wall Street analysts generally consider Burry’s warning overly pessimistic. Morgan Stanley’s chief US equity strategist Mike Wilson noted that unlike 1987, current tech giants possess strong cash flows and real earnings growth. Nvidia’s data center business revenue grew 150% year-over-year, fundamentally supporting its high valuation.

Market Reaction: Following Burry’s warning, Nvidia stock fell about 3% after hours, but most analysts view this as normal technical correction rather than trend reversal. The Nasdaq 100 Volatility Index (VXN) rose modestly, showing slightly increased market risk awareness.

Editor: GoodInfo Global News Team