Mark Spitznagel, founder of tail-risk hedge fund Universa Investments, known for its “Black Swan” strategy of hedging against extreme market crashes, says the artificial intelligence boom will culminate in a historic market collapse. Yet, rather than advising investors to cash out, Spitznagel’s firm employs a strategy that encourages them to confidently ride out a final market surge.
The AI Bubble and a Euphoric Rally
Spitznagel sounded an alarm that “Big Short” investor Michael Burry is right to warn about AI hyperscalers’ overinvestment in data centers, microchips, and circular financing arrangements. However, Burry is “going to get the timing wrong,” Spitznagel told Business Insider in a recent interview.
Instead of an immediate market breakdown, Spitznagel expects “one more really big, risk-on, insane, euphoric rally to come across risk assets.” He warned that the broader economy is quietly “rolling over” due to the delayed impacts of recent interest-rate hikes.
“But once that’s over, and it could be sooner than later, I think we’re going to get a bigger crash than we’ve seen in our lifetime,” Spitznagel told Business Insider. “I will be the biggest bear that you’ll hear from in the months ahead. I’m just not right now.”
The ‘Black Swan’ Playbook
Universa manages roughly $20 billion and specializes in “Black Swan” events—protecting portfolios against rare, extreme market disasters by buying deep “out-of-the-money” options.
This insurance-like approach means bleeding small amounts of money on average trading days to reap astronomical rewards when a crisis hits. During the COVID-19 pandemic crash in the first quarter of 2020, the fund famously posted a 4,144% return.
Why Bears Stay Bullish
Despite operating what Spitznagel calls “certainly the most bearish vehicle you’ll ever find,” this model is designed to let clients remain “extremely bullish.”
By dedicating a small fraction of a portfolio—around 3%—to Universa’s tail-hedging instruments, investors establish a safety net. This structure allows them to confidently capture the gains of the final AI melt-up.
Once the inevitable crash triggers their insurance payouts, they can mimic Warren Buffett’s crisis playbook and use those windfalls to buy stocks at rock-bottom prices.
How Have Stock Markets Performed in 2026?
The S&P 500 index has advanced 12.75% year-to-date. Similarly, the Nasdaq Composite index was up 14.05%, and the Dow Jones gained 11.13% YTD.
On Friday, the SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 and Nasdaq-100, respectively, closed mixed. The SPY was down 0.39% to $770.19, while the QQQ advanced by 0.18% to $718.96. Meanwhile, the Dow tracker, State Street SPDR Dow Jones Industrial Average ETF Trust (NYSE:DIA), also ended 0.53% lower at $534.08.
In premarket on Tuesday, SPY was down 0.22%, QQQ rose 0.075%, and DIA fell 0.81%.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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