AI-driven excitement in financial markets is beginning to resemble the speculative excess seen during the dot-com boom of 1999-2000, American investor Michael Burry has warned, raising concerns over soaring valuations in technology and semiconductor stocks, according to multiple reports. 

Burry, known for predicting the 2008 US housing market collapse, said that markets appear increasingly disconnected from economic fundamentals, with investor sentiment around artificial intelligence becoming the dominant force behind stock gains.

In a recent post on blogging platform Substack, he said discussions in the market are now overwhelmingly centred on AI, while traditional indicators such as employment data and consumer confidence are receiving little attention.

According to Burry, stock prices are continuing to rise largely because momentum remains strong, rather than due to improvements in broader economic conditions.

He also compared the current AI-led rally to the final phase of the dot-com bubble before the market downturn in March 2000, noting similarities in investor behaviour and speculative enthusiasm.

Burry highlighted the recent record highs in the S&P 500 despite weak consumer sentiment readings and suggested that optimism around AI-related businesses is overshadowing broader concerns about the economy.

The ongoing market rally has largely been led by semiconductor companies and major technology firms linked to AI infrastructure, as investors continue betting heavily on the long-term potential of generative AI technologies.

Hedge fund manager Paul Tudor Jones has also recently said the current market environment resembles the late stages of the dot-com era.

Jones warned that stock valuations could become increasingly stretched if the market continues climbing at the current pace.

On the domestic front, the technology index, Nifty IT, has gained nearly 12 per cent over the last five years, but declined around 18 per cent in the past one year and nearly 17 per cent in the last six months.

In the US, the Nasdaq Composite has delivered returns of around 91 per cent over the last five years, 46 per cent in the past one year and 11 per cent in the last six months.

Meanwhile, the S&P 500 has gained nearly 75 per cent in the last five years, around 30 per cent over the past one year and about 8 per cent in the last six months.