Renowned investor Michael Burry appears to have successfully predicted the recent downturn in AI-related semiconductor stocks after taking a bearish position against the sector earlier this year.
Burry, best known for forecasting the 2008 U.S. housing market collapse, disclosed that he had shorted the iShares Semiconductor ETF (SOXX) and increased his put option positions, citing concerns that chip stocks had become significantly overvalued.
Following his move, the semiconductor ETF declined by approximately 21% over the next month, reflecting one of the sector’s sharpest monthly pullbacks in recent years.
The fund tracks major semiconductor companies, including Nvidia, AMD, Micron Technology, and Intel.
Market analysts noted that another widely followed semiconductor fund, the VanEck Semiconductor ETF (SMH), also recorded its weakest July performance in nearly three decades.
Investment strategist Larry McDonald publicly praised Burry’s market call, describing the trade as well-timed after the sharp decline in semiconductor stocks.
Burry argued that semiconductor shares had reached historically high valuation levels, pointing to stretched price-to-sales ratios and technical indicators that suggested the market had become overheated.
Despite the recent correction, the investor has reportedly maintained and even expanded his bearish positions, indicating he expects further weakness in the semiconductor sector over the coming months.
He has also disclosed positions against individual AI chip companies as well as broader technology-focused stock indices, reflecting continued caution toward the AI investment boom.
Burry has repeatedly warned that the rapid increase in spending on AI infrastructure—including advanced chips and data centers—may eventually outpace sustainable demand.
According to the veteran investor, major technology companies could be investing heavily in infrastructure that may become outdated more quickly than expected as AI technology evolves.
The recent pullback comes after several years of exceptional growth in semiconductor stocks, fueled by rising demand for artificial intelligence, cloud computing, and advanced data processing.
While many analysts remain optimistic about the long-term outlook for AI hardware, others believe valuations across parts of the semiconductor industry have become increasingly difficult to justify.
Industry experts note that short-term corrections are common following periods of rapid growth, especially in high-demand technology sectors where investor expectations remain elevated.
Whether the latest decline represents a temporary market correction or the beginning of a broader slowdown in AI-related investments remains a key question for investors.
Source: International financial market and investment reports