According to Barry, the rise in valuations of AI-related companies has reached dangerous proportions, and the market structure has become "systemically fragile" due to the dominance of passive investments - more than half of all American assets are now concentrated in index funds and ETFs.
"When the market starts to fall, everything will fall. There will be no one to support prices."
Key Points from Barry
- AI companies are overvalued. Barry believes that giants like Nvidia and Palantir are growing not because of profits, but due to "hype and speculation around AI."
- The market lacks active investors. Passive funds do not analyze companies and do not create a "safety net," which increases risks during a downturn.
- Accounting manipulations. Many tech firms "stretch" the amortization period of AI equipment, artificially inflating profits on paper. When real expenses emerge, profitability will sharply decline.
- He himself has exited the market. Barry closed his hedge fund to avoid risking other people's money and took short positions against AI stocks, anticipating a "severe crash."
Comparison with the 2000 Bubble
According to the investor, the current situation is worse than during the dot-com era - valuations of major AI companies have reached levels not seen even at the peak of 1999–2000.
- Nvidia has a record price-to-book ratio, exceeding any company from the dot-com bubble.
- Nasdaq 100 has returned to the multipliers of the late '90s.
- The market is split: mega-cap companies trade at extreme valuations, while the rest of the sector appears moderate.
Barry does not specify exact timing for a crash but believes the market structure has become vulnerable, and even small negative events could trigger an avalanche-like decline.
He urges investors to reassess the share of risky assets, especially AI and high-tech companies, and be prepared for a period of prolonged volatility and asset revaluation.
"It's not a question of timing, but a question of structure. We are living in a bubble sustained by passive money and inflated expectations."