Michael Burry, the investor known for his prescient bets against the housing market, has expanded his bearish positions on the semiconductor sector, adding put options on Nvidia and increasing shorts on Micron and an iShares Semiconductor ETF. The move, disclosed via his Substack on July 30, challenges the prevailing Wall Street narrative that artificial intelligence-driven demand for chips will remain robust.
Burry's Nvidia puts, expiring December 18, 2026, carry strike prices in the low $100s, well below the stock's recent close of $206.64. While the options would only be profitable if Nvidia's shares fall significantly, they could also gain value from rising volatility or deteriorating sentiment. His concerns extend beyond valuation, touching on the sustainability of hyperscaler capital expenditures, the potential for circular financing between chipmakers and their customers, and the risk that rapid hardware improvements could render expensive processors obsolete before buyers recoup their investments.
The Micron short, added near $880, comes as the stock closed around $829.11. This addition, made during a rebound in both Nvidia and Micron shares, suggests Burry believes the market has not fully priced in the cyclical risks facing the memory industry. Historically, memory shortages have prompted capacity expansions that eventually lead to oversupply, a pattern Burry may be betting will repeat.
On the other side of the debate, several analysts remain bullish on Nvidia. Jefferies analysts point to Microsoft and Amazon's latest earnings as evidence that AI investments are generating tangible returns. They argue that if cloud growth and margins continue to accelerate, hyperscalers will have little reason to cut back on Nvidia processors and data-center infrastructure. Morningstar's Brian Colello also sees upside, valuing Nvidia at $280 and noting that the market underestimates the durability of AI spending. Morningstar expects custom chips from Amazon, Google, and others to complement, not replace, Nvidia's platform.
Micron presents a more direct test of the AI boom's cyclicality. Bank of America's Vivek Arya argues that memory is becoming a strategic resource, with memory expected to account for 35% to 40% of global cloud and AI infrastructure spending by 2027. He maintains a Buy rating and a $1,550 price target. TD Cowen's Krish Sankar also forecasts favorable pricing into 2027, supported by higher memory content and tight supply for high-bandwidth memory.
However, supply is already expanding. Micron has raised its capital expenditure plans, Samsung and SK Hynix are adding production capacity, and China's CXMT is pursuing further growth. These moves could eventually tip the market into oversupply, validating Burry's caution.
The broader market has shown sensitivity to AI-related headlines. Recent gains on Amazon's spending boost and Microsoft's earnings optimism illustrate how quickly sentiment can shift. Yet, DRAM ETFs have slid sharply despite record inflows, highlighting the sector's volatility.
Burry's latest bets are a contrarian signal in a market that has largely rewarded AI optimism. Whether his caution proves prescient or premature will depend on the trajectory of hyperscaler spending and the memory cycle. For now, the debate between bears and bulls remains unresolved, with high stakes for investors in Nvidia, Micron, and the broader semiconductor complex.
This article is for informational purposes only and does not constitute financial advice.
