"The Big Short" Barry's latest statement: no risk of "peak top" stock market crash in the US, but beware of the 42% inflated earnings of technology stocks.

Famous for predicting the 2008 subprime mortgage crisis, "The Big Short" investor Michael Burry has recently released a series of major market views. On one hand, he stated that the current hot rise in the US stock market is not necessarily going to immediately turn into a catastrophic collapse, but on the other hand, he used detailed data to prove that Wall Street has systematically overestimated the true earnings of tech giants by more than 40% over the past decade, and the general public investors are paying the price for it. Rejecting the "sharp top" crash theory: the market will be in a volatile trend or gradually build a top Burry made it clear in a discussion with Substack subscribers last Sunday that the "sharp top" shape, where the stock market soars straight up and then immediately crashes, is extremely rare in market history, "like a unicorn, until it is proven to exist, it is just a legend." He predicted that the market is more likely to show a volatile trend in the future, saying "there will be fluctuations, more new highs and significant pullbacks, and when future investors look back, the current rise may be seen as part of the top of the bull market". This view followed his post on the X platform last Friday. At that time, the S&P 500 index soared 12% in 13 trading days, reaching a historic high of 7126 points. Burry wrote, "The market has never experienced a sharp top," and quoted his view at the end of March as a supplement: "Shorting is not always right." As of the close of the market on Monday, the Nasdaq index ended its 13 consecutive gains and the S&P 500 index showed a slight decline. During the discussion, Burry also shared a screenshot of a recent report by BTIG titled "Rarefied Air". The chief market technician Jonathan Krinsky's team pointed out that the current market is "overall positive but slightly overheated, needing to enter a consolidation phase." The report showed that the S&P 500 index has seen a consecutive increase of more than 3% for three weeks, only the third time since 1980; the Philadelphia Semiconductor Index is more than 16% above its daily moving average line, which has only happened 13 times since 1994, usually signaling a negative for the next 10 trading days, but leaning towards positive for the next 30 trading days. Heavy warning: the earnings of tech stocks are inflated by $1.7 trillion Compared to the technical analysis of indices, Burry's in-depth research published on his Substack account is more sharp. Through analyzing over a thousand annual reports of major tech companies in the Nasdaq 100 index over the past ten years, he came to a shocking conclusion: Wall Street over the past decade has led investors to believe that the earnings of tech stocks are 42% higher than they actually are. Burry pointed out that the core of the problem lies in the accounting treatment of Stock-Based Compensation (SBC). Tech companies generally use the ambiguity of the Generally Accepted Accounting Principles (GAAP) to treat stock-based compensation as "free" employee compensation, not fully accounting for it as a real cost in the profit and loss statement. He calculated that excluding the impact of stock-based compensation, the earnings of major tech companies in the Nasdaq 100 index were overestimated by nearly 20%, "For every $1 of earnings recognized by GAAP, shareholders actually only see 83.49 cents." Burry specifically named several companies with this issue, including Meta, Datadog, Workday, Axon, Shopify, Palantir, Marvell Technology, Inc., CrowdStrike, and Zscaler. He further pointed out that Tesla's stock compensation has a particularly large scale, and by excluding it from the sample, the overall overestimation ratio drops from about 20% to 12.5%. According to Burry's statistics, over the past ten years up to the 2025 fiscal year, the 97 tech companies in the Nasdaq 100 index reported a cumulative GAAP net profit of $4.9 trillion, but Wall Street analysts generally add stock-based compensation back to earnings, pushing this number up to $5.8 trillion, creating a "fantasy profit" of up to $1.7 trillion. "Where profit is possible, manipulation exists," Burry bluntly wrote in his column called "Cassandra Unchained". In fact, this is not the first time Burry has questioned the accounting practices of tech companies. He previously warned that AI giants artificially inflate profits by underestimating asset depreciation. At the end of last year, Burry announced that he would no longer manage client funds, instead focusing on investing his own capital and sharing his investment strategy on Substack. He has long been skeptical of the AI frenzy that has driven the market to repeated new highs, warning of overvaluation, accounting doubts, overinvestment, and cyclical trading issues in the industry.