Michael Burry Targets Semiconductor Stocks

Michael Burry, renowned for his role in The Big Short, has set his sights on semiconductor stocks. This move signifies a narrowing of his bearish stance on U.S. stocks as a whole, focusing specifically on one of the most talked-about sectors in the market.

According to Scion Asset Management's latest quarterly filing, Burry purchased put options worth a substantial $47.4 million against the iShares Semiconductor ETF (ticker: SOXX). A put option grants the holder the right to sell a security at a predetermined price within a specific time frame, indicating a pessimistic outlook.

This contrarian strategy comes at a time when semiconductor stocks are highly regarded due to their association with artificial intelligence investments. Notably, Nvidia (NVDA) is the ETF's third-largest component, while Advanced Micro Devices (AMD) and Broadcom (AVG) claim the top two spots. All three stocks have experienced significant gains this year, largely driven by the excitement surrounding AI.

As of Tuesday's close, the iShares Semiconductor exchange-traded fund has recorded an impressive 46% increase year-to-date. Furthermore, it exhibited a 0.5% rise in premarket trading on Wednesday.

Burry's put trade aligns with his previous skepticism towards technology companies with soaring valuations. In recent years, he has placed bearish bets against Tesla (TSLA) and tech investor Cathie Wood's flagship ARK ETF (ARKK).

A Conservative Move by Burry

In his latest filing, Michael Burry has taken a more conservative stance than his previous bearish call on the market as a whole. While his prior quarterly filing revealed significant put option positions tied to ETFs tracking the Nasdaq 100 and S&P 500, Burry has now closed out these larger broad-based positions.

Bet Against Semiconductor Stocks

Although the outcome of Burry's bet against semiconductor stocks may partially depend on AI, there are broader signs of fragility in the sector. Several chip makers serving the auto and industrial markets have issued warnings about prolonged weak demand.

Silence Speaks Volume

Burry has chosen not to publicly comment on his recent moves, and Scion has yet to respond to requests for comments. As managers have up to 45 days to file reports from the end of the quarter, it remains unclear if Scion still holds the position and how it has performed. However, it is expected that the amount paid for the put option is much smaller than the notional value.

Burry's Legacy

Michael Burry gained mainstream fame for his bet against the housing market ahead of the 2007 subprime mortgage collapse. His story was portrayed by Christian Bale in the movie "The Big Short."