Michael Burry Warns Investors to Cut Exposure to Parabolic Tech Stocks

Market warning from Michael Burry

Michael Burry, the investor made famous for forecasting the 2008 housing crash, urged caution Sunday as enthusiasm around artificial intelligence and momentum-driven trading pushes certain stock valuations to historically risky levels. In a Substack post, Burry told readers to "reject greed" and scale back exposure to surging technology names.

"An easier way for most is to simply reduce exposure to stocks, to tech stocks in particular. For any stocks going parabolic reduce positions almost entirely," he wrote. Burry said his message is simple: raise cash and wait for a better entry point. He warned that history shows bubbles can persist longer than investors expect, but they typically end with much lower prices.

Burry has been publicly cautioning about the market for months, arguing that the current AI-driven rally increasingly resembles the late-stage dot-com boom. Last week he compared the recent run-up in the Philadelphia Semiconductor Index (SOX) to the spike in semiconductors that preceded the collapse of technology stocks in early 2000, saying the market feels like "the last months of the 1999-2000 bubble."

Strategy, risks and alternatives

While Burry says he is maintaining "a significant leveraged short position" against a portfolio of companies he views as depressed and cheapa tactic he used around 2000he cautioned individual investors against shorting the rally directly. "Shorting is not the answer. It is not something most people should ever do," he wrote, noting that bearish trades have grown expensive and that buying put options or shorting stocks can inflict significant losses if momentum continues.

Instead, Burry recommended reducing overall stock exposure and holding more cash, positioning investors to buy when prices become more attractive. His guidance underscores a broader debate on Wall Street about whether the AI-led surge in U.S. equities has become detached from fundamentals. Major indexes have kept hitting record highs even as geopolitical risks including the ongoing war in the Middle East remain unresolved.

Burrys views add to a chorus of caution from some investors and analysts who see parallels with past speculative episodes. For most individual investors, his practical advice is straightforward: trim positions in stocks that have run up dramatically, avoid expensive bets on downside, and preserve liquidity to act when valuations align with long-term fundamentals.

History, he wrote, suggests that even if the rally continues for weeks or months, the eventual resolution is likely to be lower prices and investors who have raised cash will be better positioned to take advantage of the decline.