S&P and Nasdaq Hit New Highs on Chip Rally, But Michael Burry Warns of Looming Stock Crash

Optical communication concept stocks performed particularly well, as Applied Optoelectronics ( AAOI) surged more than 24% to $184.9 per share; Lumentum ( LITE) rose more than 16%, reflecting strong expectations for optical module demand driven by AI computing infrastructure.

On the news front, Lumentum will be officially added to the Nasdaq 100 Index on May 18, replacing the spot held by commercial real estate data analytics firm CoStar ( CSGP ).

The memory chip sector also trended stronger, with Western Digital ( WDC) rising 7.46%, Seagate ( STX) gaining 6.56%, and Micron ( MU) climbing 6.5%, all hitting record closing highs, driven by the sustained climb in storage demand from AI data centers.

In terms of individual stock highlights, Qualcomm ( QCOM) rose more than 8%, Intel ( INTC) gained more than 3%, and Nvidia ( NVDA) rose nearly 2%, all reaching all-time highs.

According to people familiar with the matter, Intel's foundry business has secured a second major chip customer, which is highly likely to be Nvidia.

In contrast to the stock market rally, geopolitical risks have intensified. U.S. President Trump rejected a peace proposal from Iran, calling it "completely unacceptable."

As a result, crude oil prices rose by approximately 3%. Separate media reports indicated that the UAE launched air strikes against Iranian oil refineries in early April.

The divergence between macro news and the stock market reflects that the market is currently driven primarily by corporate earnings and AI industry trends, while geopolitical risks have yet to exert a material impact.

Nvidia has become the focus of the market. According to supply chain reports, its next-generation Vera Rubin platform is scheduled for trial production in June, with volume shipments to North American cloud service providers starting in July. Nvidia is set to release its first-quarter earnings next week, and the market widely expects demand for its AI chips to remain robust.

Analysts believe that the shipment progress of Vera Rubin and the company's performance guidance for the next quarter will be critical in determining whether AI chip demand can continue to exceed expectations.

Despite warming market sentiment, Michael Burry, the inspiration for the movie 'The Big Short,' warned that the Nasdaq's 'jumped the shark' rise faces the risk of a sharp reversal. He believes the current situation shares similarities with the period before the 2000 dot-com bubble burst and warrants vigilance.

Burry's remarks remind investors that against the backdrop of indices hitting consecutive record highs, risks of high valuations and overheating sentiment are accumulating.

While bears are issuing warnings, Wall Street bulls are equally vocal in their stance.

Dan Ives, Managing Director and renowned tech analyst at Wedbush Securities, stated on CNBC's 'Squawk Box Europe' on Monday that due to a robust earnings season and soaring enthusiasm for AI stocks, he expects the Nasdaq to reach 30,000 points next year.

Ives asserted that the AI-driven corporate IT spending cycle is only just beginning, and capital expenditures by cloud service providers and chipmakers will continue to accelerate over the next 12 to 18 months.

This stands in stark contrast to Burry's bearish stance, setting historical warnings of a 'bursting bubble' against an aggressive '30,000-point' forecast.

The market is currently in a tug-of-war between optimism and caution. In the short term, market performance will be highly dependent on the chip sector's ability to deliver results, particularly Nvidia's earnings guidance next week. If earnings exceed expectations, chip stocks are poised to continue leading the market; if they fall short, it could trigger profit-taking.

In the medium to long term, investors need to seek a balance between opportunities arising from AI industry trends and risks such as high valuations and geopolitical tensions. As the S&P 500 and Nasdaq hit consecutive record highs, the importance of risk management is increasing.

This content was translated using AI and reviewed for clarity. It is for informational purposes only.