The Big Short investor Michael Burry remains bearish even as the S&P 500 hits a fresh record high. He warns the current rally could end in a sharp sell-off, mirroring the 1987 stock market crash.

Burry stated in a Substack post on Tuesday, "I still believe the market may be approaching a major top, potentially leading to a crash similar to 1987." The S&P 500 surged 1.9% on Tuesday, closing at a record high for the first time since June, driven by better-than-expected corporate earnings and a decline in oil prices.

Where to focus

The S&P 500's new high is likely to attract additional capital inflows, according to Burry, who wrote, "I still think the market may be near a significant top, with potential for a 1987-style crash. However, the S&P 500 reaching a new high will probably draw in new money." The index rose 1.9% on Tuesday amid expectations of resumed shipping through the Strait of Hormuz, strong corporate earnings, and lower oil prices. The tech-heavy Nasdaq Composite surged 2.7%, bringing its two-day gain this week to nearly 5%.

Burry is one of Wall Street's most outspoken skeptics of the AI boom. He argues that current demand for AI infrastructure is supported by financing models that are unsustainable. He described the market's rise as a self-reinforcing cycle, where declining volatility drives programmatic investors to increase risk exposure. He wrote, "Remember, rising markets combined with falling volatility force volatility-targeting funds to add leverage, while also attracting momentum strategies to pile in."

Despite the rally, Burry disclosed that he still holds short positions in several key assets, including the iShares Semiconductor ETF (SOXX), Micron Technology, Nvidia, Caterpillar, Palantir, Tesla, and Applied Materials. He said he remains confident in the long-term outlook of these short positions but added that he would cut losses if the market continues to move against him. Burry noted that aside from his short position in Nvidia, which is in the red, his other short bets are currently profitable. He wrote, "Again, shorting is not for everyone. I choose to short, but most people should not do this."