Michael Burry has expanded his bearish positions against the artificial intelligence semiconductor sector, taking short positions in Micron, Nvidia, Applied Materials, and the iShares Semiconductor ETF (SOXX) as he warns that the industry’s valuation has reached unsustainable levels.
Burry argues that the current rally in AI chip stocks increasingly resembles the technology bubble that preceded the dot-com crash in 2000. According to his latest analysis, investors have become excessively optimistic about the long-term earnings potential of semiconductor companies, pushing valuations far beyond historical norms.
His latest positions include shorts on Micron Technology, NVIDIA, Applied Materials, and the iShares Semiconductor ETF, one of the most widely followed funds tracking the global semiconductor industry.
Micron at the Center of Burry’s Thesis
Burry argues that Micron best illustrates what he sees as excessive optimism across the AI memory sector.
The company’s shares have surged approximately 248% since the beginning of the year, placing the stock further above its 200-day moving average than at any point since 1984. According to Burry, even the peak of the dot-com bubble did not produce such an extreme technical divergence.
He also questions whether investors are ignoring Micron’s long operating history.
According to his analysis, Micron has experienced 34 stock declines exceeding 30% over the past 42 years. During that period, the company generated a median return on invested capital of roughly 4%, while free cash flow remained negative for nearly half of its operating history.
Burry described Micron as a “capital destroyer,” arguing that its profitability has historically been highly cyclical rather than structurally improving.
Unlike software companies that largely control pricing through proprietary products, Micron competes in the memory market alongside major manufacturers including Samsung and SK Hynix. When industry supply expands, pricing typically falls sharply, compressing margins across the sector.
According to Burry, that cycle has repeated itself dozens of times over the past four decades, regardless of technological trends.
Warning Signs Across the Semiconductor Industry
Burry believes the broader semiconductor market is exhibiting similar characteristics.
He noted that the Philadelphia Semiconductor Index is trading approximately 65% above its 200-day moving average, a level he says has only been reached once before — immediately prior to the collapse of the dot-com bubble.
Based on those historical comparisons, Burry believes AI-related semiconductor stocks could experience a correction of around 30%.
His view contrasts sharply with prevailing market sentiment.
Analysts note that retail investor interest in Micron has continued to accelerate, with online discussion volume reportedly rising about 260% over the past 90 days following strong earnings and optimism surrounding AI memory demand.
Rather than viewing that enthusiasm as confirmation of future growth, Burry sees it as evidence that investor expectations have become detached from historical valuation cycles.
The broader takeaway is that one of Wall Street’s best-known contrarian investors believes the AI semiconductor rally has entered bubble territory. While demand for AI infrastructure remains exceptionally strong, Burry argues that history suggests even the fastest-growing chip companies eventually face cyclical downturns, and investors may be underestimating the risks embedded in current valuations.
