Why Australian Investors Need to Pay Attention to the US Tech Bubble

What Michael Burry’s Warning Means for Australian Investors

We’ve been tracking global market sentiment for some time now, and one pattern is becoming increasingly clear: Australian Investors are reacting less to good news, both in Australia and the US. That usually signals a shift in psychology. Optimism has been priced in, and investors are starting to move from excitement to caution.

Michael Burry, the American investor and hedge fund manager who famously predicted the 2008 housing market crash, recently filed that he was shorting options on Nvidia and Palantir. His reasoning is that US tech capital expenditure is approaching levels last seen during the dot-com bubble. It’s a bold claim, but it raises an important question for Australian investors: why should we care?

Why a Slowdown in America Could Hit Closer to Home

Whether through superannuation funds or broad market ETFs, most Australians already have significant exposure to the US. According to a recent report commissioned by IFM Investors, with analysis from the Super Members Council and Mandala, Australian pension fund investment in the US is expected to more than double over the next decade, climbing from about US$400 billion to over US$1 trillion.

This growing reliance on the US market means that when the American economy slows, Australia is rarely far behind. We are starting to see early signs of that shift. The VIX Index, often referred to as the fear gauge, rose 10 percent today, suggesting investors are becoming more defensive. While we are not yet in panic territory, it’s a reminder that sentiment can turn quickly, and when it does, portfolios that are concentrated or overly dependent on US growth tend to feel it first.

The takeaway is that now may be the time for investors to focus less on chasing upside and more on protecting capital, staying diversified, and maintaining the flexibility to act when opportunities emerge.

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Why Gold’s Volatility Is Flashing a Warning Sign

When the US economy and equity markets begin to slow, Australia is almost always next in line to feel the impact. Market sentiment is already showing signs of caution. The VIX Index, which tracks volatility and investor sentiment, rose 10 percent today, suggesting that investors are starting to hedge rather than chase risk.

Traditionally, this kind of environment has been viewed as bullish for gold. Investors are taught that when uncertainty rises, capital flows into safe-haven assets. But in practice, things are more complex. Over the past year, major countries, particularly China, have been selling US bonds and buying gold in record volumes. This shift has created short-term distortions in the gold market, where both institutional and retail traders have piled in to capture momentum-driven gains.

The result is that gold, once considered a defensive store of value, has temporarily behaved like a growth asset. As speculative positioning increased, its price became more sensitive to swings in sentiment rather than just macro fundamentals. We are now seeing that unwind, with gold pulling back below A$4,000 per ounce.
What this tells us is that even traditional safe havens are no longer immune to volatility. In a market where liquidity, leverage, and sentiment are tightly linked, price movements can accelerate quickly in either direction.

The Worst Case Scenario and How To Prepare

Michael Burry’s warning about “dot-com level” tech spending is not just a dramatic headline. It highlights a deeper imbalance forming beneath the surface. When companies ramp up capital expenditure on data centres and AI infrastructure at the same time demand growth begins to slow, it can mark the early stages of a mid-cycle peak. Combine that with high valuations and a jump in volatility, and the setup starts to look more like a market preparing for correction than expansion.

In that kind of environment, Australian Investors holding portfolios heavily weighted toward US mega-cap tech stocks or ETFs such as VGS, NDQ, or IVV may want to reassess their exposure. These companies have driven much of the market’s performance over the past year, but they are also the most vulnerable when sentiment shifts. Trimming positions or rebalancing into more diversified holdings can help manage that risk without stepping completely out of the market.

It is also worth remembering that cash can be a strategic asset in late-cycle markets. Keeping around 10 to 20 percent of a portfolio in high-interest savings or short-term term deposits provides valuable flexibility. It helps reduce volatility, protects against forced selling during drawdowns, and leaves Australian Investors ready to take advantage of opportunities when markets eventually reset.