Michael Burry predicts 1987-style crash, advises buying AI index ETFs.

Investor Michael Burry has issued a stark warning about a potential stock market crash reminiscent of the notorious 1987 market collapse. Burry, known for his prescient bet against the housing market, is particularly bearish on artificial intelligence (AI) stocks. He has taken short positions in major tech companies, including Nvidia, Micron, Palantir, and Tesla, as well as the iShares Semiconductor ETF, betting against the burgeoning AI infrastructure sector.

Burry's concerns come at a time when the market has been experiencing volatility and rising interest rates. His recent comments suggest he believes the stock market is nearing a significant peak, which he fears could trigger a sharp decline. The 1987 crash, often referred to as Black Monday, saw the Dow Jones Industrial Average plummet by 22.6% in one day, driven by a combination of factors including a long bull market, geopolitical tensions, and the emergence of computerized trading. While Burry warns of a similar fate, analysts note that today's market is equipped with circuit breakers designed to prevent panic selling, which could help avert another catastrophic drop.

Despite Burry's predictions, many experts argue that the fundamentals for AI and tech stocks remain strong. Rapid advancements in AI technology and increasing demand for related hardware are driving significant investments in the sector. While some stocks have seen declines, overall market growth persists, suggesting that many AI companies are still positioned for long-term success.

In light of these mixed signals, a prudent investment strategy may be to dollar-cost average into index exchange-traded funds (ETFs). This approach allows investors to consistently buy into the market over time, mitigating the risks associated with timing the market. Historical data shows that investing in market-cap-weighted indexes can lead to substantial wealth accumulation, as successful companies tend to thrive while underperformers fade. Even amid market fluctuations, this strategy remains a reliable way for everyday investors to build their portfolios.