Michael Burry looks to be in the chips after a timely bet against semiconductor stocks.
The investor of “The Big Short” fame said in a June 30 post on Substack that he’d shorted the iShares Semiconductor ETF (SOXX) at about $643, and refreshed his bearish put options on it too.
The exchange-traded fund — which tracks the NYSE Semiconductor Index, a basket of chip stocks including Nvidia, AMD, Micron, and Intel — fell 21% over the next month to close at $505 on July 31. It rose 0.6% on Monday.
Larry McDonald, the author of “The Bear Traps Report” newsletter and the former head of US macro strategy at Société Générale, praised Burry’s wager in a Saturday post on X.
He noted that another major chip index, the VanEck Semiconductor ETF (SMH), delivered by far its worst July performance in 30 years. He tagged Burry on X and wrote “bravo.”
Burry is best known for his prescient bet against the mid-2000s housing bubble, which was immortalized in the book and movie “The Big Short.” He pivoted from running a hedge fund to writing about his personal portfolio on Substack late last year.
He laid out why he was negative on chip stocks in his June 30 post. He noted the Philadelphia Semiconductor Index was the most overextended it had been since 2000, based on its premium to its 200-day moving average, and added that its price-to-sales ratio was “very high” at over 16.
Burry labeled the SOXX a “pure form of overvaluation in an index.” He wrote that in addition to shorting it, he had “rolled” or refreshed his puts to ones expiring in March 2027 with strike prices in the low-to-mid $400s, signaling he expects the index to fall to those levels by that date.
The contrarian investor has doubled down on his bearish positions in recent weeks.
He said in a July 24 post that he’d bolstered his SOXX short at around $536, adding that together with his puts it represented a “large position” for him.
In a July 30 post, he wrote that he’d again ramped up his short at around $506, saying the bullish chip trade has lost momentum and is starting to “look tired.”
The investor has also disclosed bets against individual chipmakers, including Nvidia and Micron, along with the broader Nasdaq 100, in recent weeks.
Burry provides more real-time updates to his subscribers than virtually any high-profile investor gives to their clients. But he still doesn’t disclose every detail of his trades, including dollar amounts, so it’s unclear exactly how much he made from his chip wagers last month or how well his portfolio performed overall.
Burry didn’t answer Business Insider’s questions about his trades before publication.
The investor and writer, famous for making dire predictions about market crashes and recessions, has been one of the biggest skeptics of the wider AI boom.
He’s warned that so-called hyperscalers like Meta and Alphabet are overspending on microchips and data centers that could become outdated in a few short years.
He’s also called out AI giants, including Nvidia and OpenAI, for signing “give-and-take” contracts with each other to keep fueling the buzz around their tech.
Read the full article here
