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Nowadays there is only one noise everywhere. AI, AI and AI. Every other company is saying we are working on AI and there is only one narrative on social media. AI is the future. We will have to take AI. But in this entire party, there is one person who is standing in the corner and looking at everything from a completely different perspective.
And this is the same guy who foresaw the 2008 housing crash. And his name is Michael Burry. And today he is saying that this AI rally that is going on feels like the last month of the dot bubble. Just imagine, if Michael Burry is right, not only US tech, your portfolio, Nifty and the entire global market can be shaken.
So hello friends, how are you all? Welcome to Vishal Fin Talks. So in this video we will deep type what Michael Burry is saying exactly today? Why are they saying this and why do they feel that this AI bubble will burst and if it bursts then what can happen to your money. So let us first understand what is Michael Burry's latest warning.
Michael Burry has given a clear warning in a recent post interview and his newsletter that today's A-driven stock market looks to him like the last months of the dot bubble of 1999-2000. He says that stocks are not going up because earnings have increased. Stocks are going up because they were already going up.
That means people are buying just because prices are rising and not because the business is actually growing so much. And the most dangerous point is that the market is running on only one two letter thesis and that is AI. People think they understand AI and billions of dollars are flowing into the market based on this narrative.
Michael Burry's simple message is this is not just a normal growth story, this is madness and the bigger this bubble becomes, the bigger the risk. Now let's talk about the dot bubble and today's AI boom. Let's rewind a bit first. What was the narrative in the 1999 to 2000 dot era? The internet will change everything.
People used to buy any company whose name had a dot without thinking. Profits, cash flow, real business model, all this came later. And what is happening in today's time ? The narrative is almost the same. AI will change everything. From corporate to retail investors. Wherever the word AI is heard, people are ready to pay a premium.
At once. There are many companies that have a strong AI story presentation but lack a clear roadmap to actual profits. Michael Burry is saying that history is repeating itself. The only difference this time is that instead of dot, 'ai' is written and the numbers also look a bit scary. Top NSD stocks in past bubbles rose over 100%, and returns in today's AI leaders have been even more parabolic.
Charts have become literally almost vertical. When the chart of any company goes straight up, the risk also gets multiplied. This is the phase where people say, man, this stock has already gone up 3x so it will only go up further. That means the decision is being taken not on the basis of numbers but on pure FOMO.
Michael Wry believes that the AI bubble has become so big that when it bursts, it will not be easy for even the government and central banks to save it. So let me explain it to you through some points. Number one is massive AI capex. The world's biggest tech companies are spending crazy money on AI data centers, GPUs, chips, power, cooling, all this infrastructure.
Billions of dollars are being invested every quarter on the assumption that AI will multiply their profits in the future. Number two, if the story weakens and the expected revenue from AI does not come as fast, user adoption slows down, regulations come in or competition empties margins, then all this heavy capex may start appearing as misallocation from one point.
Then comes the chain reaction. Projects get cancelled. Hiring stops. Companies lay off. Companies take write-downs and stock prices crash because of this. And it does n't stop there, though. Impact goes on and on. There is pressure on the balance sheets of banks, suppliers, VC funds, startups etc. Michael Burry is speaking, this bubble is no longer just about one sector.
This has become systematic. That's why Michael Burry says It's Too Big to Save Now. Michael Burry also says that the market is now running on hype and not on data. And another thing that Michael Burry highlights is market behavior. What happens normally? If the jobs data is bad, if the growth is slow, then the market becomes a little cautious.
But today we are seeing that even after weak data, AI and tech stocks are going up. Because people are not thinking about what the economy is doing. People are just watching whether the price of companies with AI is going up or not. And this is the same pattern that was also seen in the 1999, 200.com and 2007 housing bubbles.
Where narratives grew out of numbers. The story seemed better than reality. Hope looked better than Data. Michael Burry is basically saying that the script is the same old one. Only the actress is new. First there was the dot and the housing bubble, now there is AI. Now let's focus on the hottest question.
What could happen if this AI bubble bursts? Number one US tech and AI leaders. The first impact will be on those stocks which are today's superstars. Big AI, semiconductor joints, cloud infra companies and whose charts have gone straight line up. Falling into them can also be brutal. A crash of 40%, 50%, even 70% is possible when the narrative breaks.
So now there is a homework for you which I just told you that these companies are working in this segment. So look at the charts of those companies and tell me in the comments which companies' charts are going up in the same straight line. Number two broad market, NSDC & SNP As the top names start falling apart, the index overall starts to crumble.
There is so much money invested in passive investing and ATF these days that when panic selling starts, it will trigger panic selling and selling. Number three global market and India. Nifty, Sussex here comes your direct direct connection. Even though India's economy is comparatively strong and earnings are good, in the face of global risks, foreign investors first withdraw money from emerging markets and India is one of their top liquidity destinations.
So, this means that if US tech and AI companies crash, sharp corrections, gap downs, openings and panicking, selling are quite possible in Nifty and Susec as well. Indian IT tech, AI theme or chip linked stocks may be even more vulnerable as their business is directly linked to the global tech cycle.
Now the question is, what can you and I, the retail investors, learn from all this? So there are some lessons in this like lesson number one don't make friends with parabolic charts. If you have stocks that have gone up 2x, 3x, 4x in 6 to 12 months just on AI or hype narrative, then do n't get emotionally attached to them.
Investors like Michael Burry become alert when they see these types of charts. What could be the logical steps here ? Book partial profits, reduce position size or at least avoid fresh buying at this level. Lesson number two is to avoid over concentration. If 60 to 70% of your portfolio is filled with only tech, AI, IT or related stocks, then your overall wealth can take a huge hit in a crash because diversification becomes boring.
But this will provide the maximum shield at the time of crash. Lesson number three: survival is more important than FOMO. A line is definitely heard in between every bubble. This time is different. People were saying the same thing during the time of Dr.com. And today, in the time of AI, the same line is being repeated.
Michael Vary is simply reminding us that history rarely writes a new story, and it retells an old story with a new name. If you are a long term investor then your real objective is not just returns. Your real objective is to survive the game even after crashing. Now let's talk about whether Michael Burry is always right?
Michael Burry himself admits that sometimes he becomes bored before time. Sometimes a warning was given on Bitcoin, sometimes a crash call was given on the market and the market also ignored it for a long time. So will Michael Burry be wrong this time too? So friends, this is not necessary. There are two different things in the market.
First, to be right and second, to be right at the right time. Michael Burry's strength is spotting long-term imbalances. But it is almost impossible for a normal investor to predict the exact top and crash date. So what is the smart approach? The smart approach is to not ignore Michael Burry's warning.
Do n't go into panic mode and sell everything. Adjust your risk gradually. Rebalance the exposure and keep your time horizon clear. So friends, I have prepared a small checklist and I want to share that checklist with you. Is my portfolio stuck with more than 50% direct or indirect AI tech IT exposure?
Do I have stocks whose charts have gone straight up? But I do n't really understand their business and cash flow. If the markets open 20 to 30% down tomorrow morning, will I be able to handle it emotionally without panic selling? Do I have some cash so that I can buy at a better valuation in the future?
If you don't feel uneasy answering these questions, then perhaps this is the right time to re-evaluate your risk. So friends, if you liked this breakdown then do like the video and if you are new to the channel then do subscribe to the channel and yes, do share this video with those friends who are blindly buying stocks just by hearing about AI so that they too can know what the other side of the story is saying and do tell us in the comments whether you think that Michael Vary is overreacting this time or you too are feeling the fear of AI bubble deep inside. See you in the next video. Till then keep learning, keep growing. Thank you.
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