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Michael Burry goes bearish against entire semiconductor sector

Michael Burry goes bearish against entire semiconductor sector

In August of this year, renowned investor Michael Burry captured attention by disclosing a substantial bearish position of $1.6 billion against the US stock market. Over subsequent months, scrutiny intensified as the performance of Burry’s investment unfolded amid market fluctuations. 

The latest regulatory filings for the quarter, however, unveil a significant pivot in Burry’s strategy. 

Notably, he exited his bearish stance on the S&P 500 and Nasdaq-100 at a significant loss, redirecting his pessimistic outlook towards a specific sector: semiconductors.

Burry adds a bearish position on major semiconductor ETF

According to securities filings published on November 14, Burry is now betting against semiconductors, also referred to as ‘chip stocks.’

Scion Asset Management, a hedge fund he manages, revealed a significant position consisting of bearish options on a popular semiconductor-focused exchange-traded fund (ETF). To be more specific, Burry and his investors purchased put options with a notional value of $47.4 million against the iShares Semiconductor ETF (SOXX), the filings showed.

“Notional value” represents the total value of assets linked to options contracts, distinct from the disclosed contract price or its current actual value. Though the filing did not specify the cost, it’s likely much smaller than the reported notional value of the underlying securities.

Which specific stocks is Burry betting against?

SOXX is one of the biggest semiconductor ETFs, which has amassed assets of more than $8.77 billion. 

When it comes to the stocks the fund is tracking, it is focused on the biggest semiconductor-related companies. Notably, its biggest holdings include AMD (NASDAQ: AMD), Broadcom (NASDAQ: AVGO), Nvidia (NASDAQ: NVDA), Intel (NASDAQ: INTC), and Texas Instruments (NASDAQ: TXN).

Top 10 holdings of the SOXX ETF. Source: Seeking Alpha

The remaining five among the top 10 holdings include Qualcomm (NASDAQ: QCOM), Micron (NASDAQ: MU), KLA Corp (NASDAQ: KLAC), Applied Materials (NASDAQ: AMAT), and Lam Research (NASDAQ: LRCX). 

Overall, the SOXX ETF surged more than 47% year-to-date, driven primarily by the ongoing artificial intelligence (AI) boom. 

So, in conclusion, Burry’s latest bearish position is betting against the world’s biggest chipmakers. The move comes at an interesting time, considering that these companies are thriving on the craze around generative AI technology, with some of them seeing even triple-digit returns in the stock market this year. 

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