Michael Burry, the hedge fund investor who predicted the global financial crisis and became the real-life model for the film "The Big Short," has disclosed short positions in major semiconductor stocks including Nvidia, warning that the collapse of the artificial intelligence (AI) market bubble is imminent. He drew particular attention by interpreting the large-scale chip investment plans recently announced by Samsung Electronics and SK hynix as a peak signal for the AI rally.
According to CNBC on June 30, Burry said in a Substack post to investors that he had shorted Nvidia, Applied Materials, Tesla, the iShares Semiconductor ETF and Caterpillar.
He analyzed the large-scale investment plans announced by Korean memory chipmakers on June 29 as a peak signal for the AI investment cycle. "The direct trigger for today's rally is the large-scale investment plan announced in Korea," Burry said. "But I see this as the 'beginning of the end.' It's now just a matter of time."
This targeted the surge in semiconductor equipment stocks on the New York exchange after Samsung Electronics and SK hynix announced plans to build four new semiconductor plants worth 800 trillion won in the southwestern region including Gwangju. That day, the Philadelphia Semiconductor Index (SOX) surged 3.92% on the New York market. AMD rose 6.86%, Intel 7.23%, Applied Materials 6.00% and KLA 5.29%.
Burry said he had shorted Caterpillar for the first time, a representative beneficiary of the AI investment boom. Caterpillar, the world's largest maker of construction and mining heavy equipment, is not a semiconductor company but is regarded as a leading infrastructure beneficiary of the AI data center construction boom. "Caterpillar is a stock that delivered good returns as a long position in the past, but this time it caught my eye first," he said, assessing that the stock was excessively overvalued. Burry argued that Caterpillar's price-to-sales ratio (PSR) had soared to its highest level in about 30 years.
Burry's disclosure of these short positions came right after the Philadelphia Semiconductor Index posted its highest-ever quarterly return, surging 101% in the first half of this year alone and 88% in the second quarter alone. Expectations of expanded AI infrastructure investment lifted semiconductor stocks, but Burry appears to have judged this instead as a signal of overheating. He expressed concern about valuations in the semiconductor sector. He noted that the Philadelphia Semiconductor Index is currently trading about 65% above its 200-day moving average, pointing out that "such a divergence is the first since the dot-com bubble of 2000."
Burry, known as the real-life model for "The Big Short," the film depicting the story of a hedge fund investor who foresaw the 2008 global financial crisis, has consistently warned about excessive valuations and investment concentration in AI-related assets. However, Burry's short positions have not always been correct. He became a "Big Short" legend by accurately predicting the 2008 global financial crisis, but his subsequent Tesla short and his large-scale put option bet against the entire U.S. stock market in 2023 failed to produce the expected results as the market rebounded. On the other hand, his shorts on AI-related stocks such as Nvidia and Palantir last year are assessed to have paid off in the short term during the AI correction phase.
