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Michael Burry’s iShares Semiconductor ETF puts take a hit

Michael Burry's iShares Semiconductor ETF puts take a hit
Vinicius Barbosa

Well-known investor Michael Burry faces a setback as the iShares Semiconductor ETF (NASDAQ: SOXX), against which he bought puts, climbs.

In the past 30 days, SOXX rose 10.58%, trading at $541.79 per share at the time of publication. Incurring proportional unrealized losses for the short-seller that became known by his fantastic performance during the 2008 crisis, featured in “The Big Short” movie.

iShares Semiconductor ETF (NASDAQ: SOXX), daily chart. Source: TradingView

Michael Burry’s bet against the semiconductor industry hit a snag with the unexpected surge in the ETF value. A put option, allowing investors to sell a specific asset at a predetermined price within a set timeframe, becomes profitable when the asset’s price falls. Burry’s puts are now at a disadvantage due to recent gains in the sector.

Essentially, Burry’s strategy resulted in an indirect short position against prominent semiconductor firms like NVIDIA Corps (NASDAQ: NVDA) and Advanced Micro Devices, Inc. (NASDAQ: AMD).

Michael Burry’s loss: Semiconductor market is heated by AI solutions

Notably, both companies and Broadcom Inc. (NASDAQ: AVGO) constitute a large weight of the ETF’s portfolio, which has witnessed an uptick largely attributed to the current frenzy around artificial intelligence (AI) applications.

The bullish semiconductor market trend defies the expectation of a downturn that Burry’s position assumed. Notably, the ETF’s top holdings, such as AMD, Broadcom, and NVIDIA, have seen sustained growth. In particular, this growth could be partly due to the increasing demand for AI-capable hardware.

Burry, known for his prescient bets against the housing market before the 2008 financial crisis, has made his name by identifying and capitalizing on market disparities. Nonetheless, his current position against SOXX faces challenges as market conditions favor semiconductor stocks.

Interestingly, Elon Musk’s AI Grok has recently been opened to X (formerly Twitter) “Premium +” users.

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