Michael Burry’s Warning: An AI Stock Downturn Could Trigger a Crypto Market Crash

Famed investor Michael Burry—the man who called the 2008 housing bubble—is now pointing his finger at a new domino. His latest prediction? A sharp correction in overheated artificial intelligence stocks could send shockwaves straight into the cryptocurrency market.

The Contagion Risk

It's a classic tale of interconnected risk. The same speculative capital chasing parabolic gains in AI equities has been flooding into digital assets. When that tide of 'fast money' reverses, it doesn't discriminate. A sell-off in tech could trigger a brutal liquidity crunch across crypto portfolios, exposing just how many investors are playing both sides with the same chips.

A Warning from History

Burry's track record forces the market to listen. His warning isn't about the fundamentals of blockchain, but about the fickle psychology of a market still driven by narrative and leverage. When fear hits one high-risk asset class, it has a nasty habit of spreading to all the others. Crypto, for all its decentralization talk, hasn't decoupled from Wall Street's sentiment.

The bottom line? The next market crisis might not start with mortgages. It could start with a chip shortage, an earnings miss, or simply the realization that not every company is an AI company—and the bill will be sent to your crypto wallet. Just another day where traditional finance's hangover becomes crypto's headache.

Stock Market Crash Could Hit Crypto Next: Michael Burry

Michael believes the stock market is in a very risky phase. According to him, U.S. households now hold more wealth in stocks than real estate—something that has only happened twice before, in the late 1960s and during the dot-com bubble. Both times, long bear markets followed. He thinks today’s market looks similarly stretched and vulnerable.

Burry is openly negative on Bitcoin price and crypto. He has called Bitcoin a “modern tulip bubble” and believes it has little real value. More importantly, he warns that if stock markets fall sharply, crypto assets are likely to fall too, as seen during the 2022 crypto winter when the Nasdaq dropped around 30%.

Source: CryptoPatel X

Why Michael Burry’s View Matters?

Burry’s opinions matter because history supports his warnings. He successfully predicted the 2008 housing crash when most investors were bullish. He also closed his hedge fund before that crash—exactly what he has done again now. This pattern makes investors pay close attention.

Burry backed his views with action by buying put options against Nvidia and Palantir. While the media reported this as a $1+ billion bet, the actual money invested was much smaller. However, the bet pays off only if these stocks fall sharply, showing strong long-term bearish conviction.

Burry shut down his hedge fund to manage only his own money. He believes markets are no longer driven by fundamentals, making professional fund management less effective. This mirrors his MOVE just before the 2008 crash.

Why Is He Bearish on AI Stocks?

Michaelbelieves AI stocks are priced far ahead of reality. Tech companies are spending huge amounts on AI infrastructure, similar to spending patterns before the 2000 and 2008 crashes. At the same time, actual cloud revenue growth has slowed, raising doubts about AI’s ability to deliver profits quickly.

Source: YouTube

Why Palantir Specifically, and What About Nvidia?

He argues Palantir rebranded itself as an AI company after ChatGPT became popular. He questions whether its growth justifies its valuation. Nvidia, while extremely profitable, may also be overvalued. History shows that even great companies like Cisco and Intel crashed after hype-driven booms.

Why Passive Investing Is a Big Risk?

According to Michael, passive investing now dominates markets. When crypto markets fall, passive funds sell everything together, increasing downside risk and making it hard to stay protected.

He advises selling highly speculative, fast-rising stocks. Instead, he prefers undervalued healthcare stocks, such as UnitedHealth and Molina Healthcare, which also attract long-term investors like Warren Buffett.

Overall Scenario and Conclusion

Michael believes markets are driven more by HYPE than fundamentals. While this is not a call to panic, his warning suggests investors should stay cautious, reduce exposure to overhyped assets, and focus on stable, value-driven opportunities.

Disclaimer: This is not financial advice. Please DYOR before investing. CoinGabbar is not responsible for any financial losses. crypto assets are highly volatile, and you can lose your entire investment.