"The Big Short" Burry and Legendary Investor Jones Warn in Unison: AI Frenzy Reminiscent of Pre-Crash 2000

Source: JIN10 Data

Michael Burry, the "Big Short" investor famed for predicting the U.S. housing market collapse, has issued a warning that the current stock market's obsession with artificial intelligence is beginning to resemble the final stages before the dot-com bubble burst.

Burry wrote in an article published last Friday on the Substack platform that he had been listening to financial TV and radio programs during a long drive and felt "everyone talks endlessly about AI, nothing else is discussed all day."

This investor, best known for his successful bet against the U.S. housing market, stated that the stock market is no longer reacting in a logical, substantive way to economic data such as jobs reports or consumer confidence.

Last Friday, the S&P 500 hit a record high as traders focused more on the slightly better-than-expected April nonfarm payrolls report rather than the record low consumer confidence index.

But Burry wrote that stocks aren't rising or falling because of employment or consumer confidence. "They rise in straight lines because they have been rising in straight lines, powered by nothing more than a two-letter thesis everyone thinks they understand... It feels just like the last months of the 1999–2000 bubble."

Burry compared the recent trend of the Philadelphia Semiconductor Index (SOX) to the run-up before the tech stock crash in March 2000. The index rose more than 10% last week, bringing its year-to-date gain for 2026 to 65%.

Burry's remarks come as investors have poured money into AI-related stocks over the past two years, driving major U.S. stock indices to repeated record highs. Semiconductor companies and giant tech stocks related to AI infrastructure and software have led this rally, with the hype over generative AI fueling sharp valuation increases.

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

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

At the same time, Jones also warned that if valuations continue to balloon, the eventual correction could be very sharp.

Jones said to imagine the stock market rising another 40%, then the ratio of market capitalization to GDP could reach a staggering 300% or even 350%. "Everyone knows in their heart of hearts, there will be some sort of eye-popping adjustment at that point."