Michael Burry, the famous investor from "The Big Short," has built a significant short position against the semiconductor industry, sparking widespread market attention. Burry pointed out that the current rally in semiconductor stocks is primarily driven by technical factors and market sentiment, likely lacking long-term fundamental support. He purchased put options on the iShares Semiconductor ETF (SOXX) and Nvidia expiring in early 2027, while contrarily increasing his positions in "battered" software and payment stocks such as Microsoft, Adobe, and PayPal.

Michael Burry Expects Semiconductor Index to Plunge 30%

The Philadelphia Semiconductor Index has risen for 18 consecutive trading days, mainly benefiting from data center expansion and expectations of chip supply shortages. However, Burry believes this rally is "driven more by technical factors" rather than fundamental support. He noted that the price-to-earnings ratio of the iShares Semiconductor ETF has reached a relatively high level, indicating a significant technical premium in stock prices. He argues that the capital-driven upward trend is difficult to sustain in the long run. As the deviation between the stock price and the 200-day moving average widens, the market's expectations for future earnings may have already been overdrawn.

Burry bought put options on the semiconductor ETF (SOXX) with a strike price of $330, expiring in January 2027, and simultaneously purchased Nvidia put options with the same expiration date.

With SOXX currently priced at $461, Burry's move indicates his belief that SOXX will fall below $330 by January 2027, representing a massive drop of up to 28%.

Buying Software Stocks to Bet on Sector Rotation and Hedging

Burry is not entirely bearish on the tech sector. While shorting semiconductors, he contrarily added to his positions in heavily beaten-down software and payment stocks like Microsoft, Adobe, and PayPal.

Burry's bearish stance does not deny the long-term development of semiconductors but highlights the gap between capital market pricing and real economy operations.

This strategy of reducing exposure to overvalued hardware and accumulating undervalued software reflects the hedging operations of professional institutions. By purchasing long-term put options, Burry not only hedged against macroeconomic volatility risks but also provided downside protection and a hedging mechanism for his portfolio in future market corrections.

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