Michael Burry is bringing forward his call on a turn in the AI trade, CNBC reported on Sept. 29. The investor known as the real-life inspiration for The Big Short has converted part of his direct short positions in Micron Technology, Nebius, Palantir, and the iShares Semiconductor ETF (SOXX) into put options to get more leverage at a lower cost.
In his latest investor letter, Burry wrote: "From a fundamental standpoint, I am moving up the timeline, so I want to increase the leverage in my short exposure. Once the timing is clearer, leverage becomes easier to accept. Nothing expresses leverage better than options, and with volatility measures such as the VIX currently very low, puts are relatively cheap."
Bearish positions moved from direct shorts to puts
Burry said part of the adjustment was made to reduce tax burden, but the main reason was his belief that "the AI bubble may, sooner or later, burst earlier."
- He replaced his Micron short with put options expiring in June next year, with strikes in the $500 range.
- He replaced his Nebius short with put options expiring in June next year, with strikes in a double-digit range.
- He replaced his SOXX short with put options expiring in September 2027, with strikes slightly above $400.
- He rolled out and expanded his existing short and put positions in Palantir, centered on put options expiring in September 2027 with strikes slightly above $100.
Ares research cited on the AI spending cycle
Burry cited research from Ares Management saying the current AI investment boom depends on companies continuing to increase capital expenditure and on AI revenue that has not yet been fully proven.
He said that if even one quarter of AI revenue comes in below the level needed to justify that spending, some corporate boards could shift capital back toward projects with higher certainty. He added that existing legal agreements leave room for that kind of reallocation.
Still bearish on the memory-chip cycle
Beyond AI monetization, Burry said he remains bearish on the memory-chip cycle. He cited comments from Acer CEO Jason Chen, who said that as China's memory-chip capacity keeps expanding, the industry cannot maintain a supply shortage for a long period and the memory market will eventually return to cyclical swings.
His tech bearishness has been in place for months
Burry has stayed bearish on technology stocks this year. In May, he said the current market resembled the final months before the 1999-2000 dot-com bubble burst.
U.S. equities kept climbing after that call, with the Nasdaq Composite setting a fresh record last week. Micron and Palantir are currently about 16% and 10% below their respective all-time highs.