Source: Jinshi Data

Michael Burry, the prototype of the "big short" known for predicting the collapse of the US housing market, has issued a warning that the current obsession with artificial intelligence in the stock market is beginning to remind one of the final stages before the collapse of the internet bubble.

Burry wrote in an article published last Friday on Substack that while driving long distances, he has been listening to financial news on television and radio, feeling that “everyone is endlessly talking about AI, no one else is discussing anything all day.”

The investor, best known for successfully predicting the collapse of the US housing market, stated that the stock market no longer responds logically or substantially to economic data such as employment reports or consumer confidence.

Last Friday, the S&P 500 index hit an all-time high, as traders focused more on the slightly better-than-expected April non-farm payroll report than on the record low consumer confidence index.

However, Burry wrote that the rise and fall of stocks is not due to employment or consumer confidence, “They are rising simply because they have been rising, backed by a two-letter conclusion that everyone thinks they understand… it feels like the last few months of the bubble from 1999 to 2000.”

Burry compared the recent performance of the Philadelphia Semiconductor Index (SOX) to the rise before the tech stock crash in March 2000. This index has risen over 10% last week, bringing its cumulative increase for 2026 to 65%.

Burry made these remarks as investors have poured into AI-related stocks over the past two years, driving major US stock indices to new highs. Semiconductor companies and giant tech stocks related to AI infrastructure and software have led this rally, with the enthusiasm for generative AI driving a sharp increase in valuations.

Legendary macro trader, founder, and chief investment officer of Tudor Investment Corporation, Paul Tudor Jones, also compared the current AI-driven rally to the period before the internet bubble burst, although he believes this bull market may have further room to rise.

Jones told CNBC's "Squawk Box" program that the current environment feels like 1999—as it did about a year before tech stocks peaked in early 2000, he estimates this rally could continue for another year or two.

At the same time, Jones warned that if valuations continue to expand, the eventual correction could be very severe.

Jones said, “Imagine if the stock market rises another 40%, then the ratio of the stock market's market value to the total economy (GDP) could reach an astonishing 300% or even 350%. Everyone understands that there will definitely be some kind of shocking correction at that point.”

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