Michael Burry, who predicted the global financial crisis, warned of a bubble burst in the artificial intelligence (AI) semiconductor market. Burry pointed to the massive facility investment announcements by Korean semiconductor corporations as both a "peak signal" for the AI rally and "the beginning of the end," heightening market concerns.
According to reports from CNBC and other foreign media on the 1st (local time), Michael Burry said on his Substack that he has built new short positions against Nvidia, Applied Materials, Tesla, the iShares Semiconductor ETF (SOXX), and Caterpillar, a leading beneficiary of global infrastructure.
Burry's short disclosure came just after the Philadelphia Semiconductor Index surged 101% in the first half of this year and 88% in the second quarter alone, marking its highest quarterly return on record.
Burry, citing the massive investment plans of Korean memory players Samsung Electronics and SK hynix, said, "The direct cause of today's share-price gains is the large-scale expenditure announced in Korea," while adding, "I see this as the 'beginning of the end,' and it is now only a matter of time before the bubble deflates."
This was aimed at the announcement by Samsung Electronics and SK hynix that they would build four new semiconductor plants, totaling 800 trillion won, in Gwangju and other locations.
He explained that the Philadelphia Semiconductor Index is currently trading about 65% above its 200-day moving average. He expressed concern that this is a dangerous level observed during the 2000 "dot-com bubble."
Burry said he shorted Caterpillar, a leading global AI infrastructure beneficiary, for the first time, noting, "Caterpillar has been a good long that delivered solid revenue in the past, but this time it stood out first," and "Caterpillar's price-to-sales ratio (PSR) has surged to its highest level in roughly 30 years."
With Burry's warning and rising concerns about excess AI computing capacity, New York stocks saw heavy selling overnight, led by tech shares.
Memory-chip maker Micron Technology plunged 10.57% from the previous trading day, and SanDisk (10.62%) also fell by more than 10%. AMD (-6.89%) and Intel (-9.03%) tumbled, and Nvidia, the leading AI chip bellwether, slipped 1.25%.
The previous day, Korean semiconductor corporations' shares also broadly declined. Samsung Electronics and SK hynix closed down 5.84% and 3.40%, respectively, from the prior trading day.
It is seen as profit-taking spurred by warnings that Korea's large-scale investment could instead lead to future oversupply and deteriorating profitability.
Burry is known as the real-life model for the movie "The Big Short," which foresaw the 2008 global financial crisis. He has recently warned about excessive valuations and investment concentration in AI-related asset classes.
However, Burry's shorts have not always hit the mark. He correctly predicted the 2008 global financial crisis, but his short on Tesla and his large-scale put-option bet targeting the entire U.S. stock market in 2023 did not deliver strong results due to a market rebound.