Michael Burry adds to shorts as Nasdaq-100 hits all time high. Why he's betting against chips
Michael Burry thinks the memory chip industry could return to its cyclical history and zap high-flying technology stocks that drove the Nasdaq-100 index to an all-time high this week. Burry, who rose to fame for calling the housing crash before the global financial crisis of 2007-2009, said Tuesday he thinks the structural shortage of memory chips that has minted new trillion dollar companies during the current AI buildout is temporary and that the sector is due to return to its old boom-and-bust ways. “Over the next two years this shortage will blow off as production catches up, and memory will have a down cycle again,” Burry wrote in a Substack post . Burry is increasing his short positions on memory maker Micron Technology , cloud platform Nebius Group , the SOXX iShares semiconductor ETF and data analytics and software provider Palantir , he said. MU 6M mountain Micron Technology over the past six months “I will watch however, and look to cover should the market take these up to new highs again,” he said. “I continue to hold my puts.” Chinese memory capacity Burry backed his position by citing a Taiwanese media report in which the CEO of electronics maker Acer noted increasing Chinese memory chip production capacity. “How could there be a continuous shortage? China’s production capacity has been consistently increasing, and there is absolutely no shortage issue. Contract prices are currently fluctuating at a high level, with some prices going up and others down,” CEO Jason Chen was quoted as saying. U.S. economists have made similar warnings recently. Sujai Shivakumar at the Center for Strategic and International Studies in Washington, discussed the possibility of a coming memory glut due to heightened Chinese output in a paper published Thursday. “Chinese overcapacity could become the next memory-market risk,” the economist wrote. “Expanding Chinese DRAM and NAND production may ease some near-term pressure, but it could also produce future surplus, dumping, trade friction, and deeper dependence on Chinese suppliers for commoditized but strategically important memory devices.” Boise, Idaho-based memory chip maker Micron could feel pressure from additional Chinese capacity since the company has been boosting capital spending, building several new plants in its home state. Micron is awash in cash due to soaring profit margins and vigorous pricing power. Forward free cash flow stands at $130 billion compared to $26 billion in May, $10 billion in February and $4.7 billion in November of last year, according to FactSet data Increased AI trade dispersion Burry described the Nasdaq-100 in his Wednesday post as “historically overvalued and historically top heavy.” The index gained nearly 1% Tuesday to close at an all time high of 30,732, rising for the fifth day in six. QQQ 6M mountain Nasdaq-100 ETF over the past six months Some technical analysts on Wall Street, however, have recently observed some increasing dispersion within the Nasdaq-100 and, more broadly, in the AI trade. “The NDX is ~flat since mid-August, but the percent of names above their 200 [day moving average] has gone from 77% to 56%,” Jonathan Krinsky at BTIG wrote in a report to clients last week. “The good news is this means stock selection has a higher importance … The bad news is this means the overall AI trade is not as robust.” Burry said Tuesday that he’s also increasing long positions on more of his preferred names. “I purchased more QXO (QXO), more Build-A-Bear (BBW), more Sprouts (SFM), more Birkenstock (BIRK), and more Mercado-Libre. All have corrected tremendously, and I find the prices offered by the market rather attractive. All these positions are full positions for me now,” he wrote.
