Renowned investor Michael Burry, famed for predicting the 2008 financial crisis, is encountering setbacks with his recent bearish bet.
Scion Asset Management, a hedge fund led by Burry, initiated a bearish position in Q3 by purchasing put options linked to the iShares Semiconductor ETF (SOXX). Unfortunately for the fund, SOXX surged 11.5% in the past 30 days, resulting in significant unrealized losses.
But what was intended to be his latest ‘Big Short’ might not be encountering just short-term challenges as the broader risk emerges from the anticipated explosive growth in AI chipmakers, stocks playing a pivotal role in SOXX’s ascent.
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AI chip industry could be worth $400B in four years
Shay Boloor, stock investor and co-host of the Pounding the Table podcast said in a December 12 post that the AI chip sector “is not just growing, it’s exploding.”
His comments were based on a recent prediction by AMD’s (NASDAQ: AMD) CEO Lisa Su, who said the AI chip industry could be worth over $400 billion in the following four years. That projection is more than twice as high as the one that AMD provided in August, underscoring how rapidly expectations are changing for the AI sector.
If this forecast comes to fruition, key companies that will likely be driving this growth are mainly semiconductor giants, including Nvidia (NASDAQ: NVDA), AMD, Intel (NASDAQ: INTC), Cadence Design Systems (NASDAQ: CDNS), and Broadcom (NASDAQ: AVGO), among others.
All of these stocks are the primary drivers of SOXX, the ETF Michael Burry bet against and are well-positioned to continue their momentum based on recent forecasts that the broader AI market could be valued at a staggering $1 trillion in 2028.
As such, should Michael Burry choose not to close his position against the semiconductor fund, the Big Short investor might encounter significantly negative returns on his investment.
This scenario holds unless he manages to execute another prophetic masterpiece by accurately predicting a major crash in this sector, contrary to prevailing expectations.
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