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Michael Burry, the famous investor who bet against the housing market, is sticking to his pessimistic view even as the S&P 500 surges to record highs. He warned that the ongoing rally could still end with a massive sell-off similar to the 1987 stock market crash.

"I still believe we may be approaching a significant peak and could see a 1987-style decline, but the S&P 500 hitting new highs might draw fresh money into the market," Burry wrote in a post on Substack on Tuesday. The S&P 500 jumped 1.9% on Tuesday, closing at its first record high since June, fueled by better-than-expected corporate earnings, a drop in oil prices, and optimism that shipping in the Strait of Hormuz might resume. The tech-heavy Nasdaq Composite surged 2.7%, climbing nearly 5% in just the first two trading days of the week.

Exploring the rationale behind just 10 ASX 200 shares

Burry has been one of Wall Street's most outspoken skeptics of the artificial intelligence boom, arguing that the demand for AI infrastructure is being driven by financing deals that may not be sustainable. He stated that the market's rise is creating a self-reinforcing cycle, where declining volatility pushes systematic investors to increase their exposure.

"Remember, markets rise as volatility falls, forcing volatility-targeting funds to add leverage and pulling in other momentum strategies," he wrote. In the face of this rally, Burry says he is maintaining his short positions in the iShares Semiconductor ETF (SOXX), Micron, Nvidia, Caterpillar, Palantir, Tesla, and Applied Materials. The investor said he remains confident in the long-term outlook for these positions, though he added that he would cut losses and exit if the trades move significantly against him. He noted that all positions, except the short on Nvidia, are currently profitable.

"Again, shorting is not for everyone," Burry wrote. "I have to short. Most people should not."