- Michael Burry expanded his months-long AI short with new bearish positions against Tesla (price target $416.22), Caterpillar, Applied Materials, and the SOXX semiconductor ETF via put options that pay off in March if the index drops roughly a third from its peak — a more moderate target than his previous SOXX options, which bet on a steeper drop by January.
- The trigger: Samsung and SK Hynix’s announcement of $500B+ in chip hub spending sent chip stocks surging the next day — Burry called it “the proximate cause of today’s rally” and wrote on Substack: “Well, I see that as the beginning of the end,” arguing the capex orgy is a contrarian warning sign, not a bullish catalyst.
- Burry also added to his existing months-long Nvidia short (currently only ~5% in the money since November) while Palantir — the other half of his November thesis, which Palantir CEO Alex Karp called “bat-crazy” — has performed better, with shares down roughly 40%.
- Caterpillar is a notable new target: Burry noted it had worked “on the long side” for him before, but its equipment is now central to data center and chip-manufacturing hub construction — making it a proxy for AI capex that Burry views as overextended; the stock has climbed sharply in recent months on that exact thesis.
What Happened?
Michael Burry — the investor immortalized in “The Big Short” for correctly betting against the US housing market in 2008 — disclosed an expanded AI short portfolio Tuesday on his Substack. New bearish positions include Tesla ($416.22 price target), Caterpillar, Applied Materials, and the SOXX semiconductor ETF. He also added to his existing Nvidia short. The catalyst was Samsung and SK Hynix’s $500B+ chip investment announcement, which sent chip stocks leading the Nasdaq higher. Rather than reading the Korea news as validation, Burry framed it as a warning: “The proximate cause of today’s rally is big spending announced out of Korea. Well, I see that as the beginning of the end.” His SOXX puts expire in March if the ETF drops roughly a third from its peak — a level he called “a pure form of overvaluation in an index, a form that is rarely seen and never so easily recognized as such.”
Why It Matters?
Burry’s expanded short is the most prominent contrarian data point in the ongoing debate about whether AI capital expenditure will generate adequate returns. The bull case embraced by hyperscalers and chip companies is that AI infrastructure investment is demand-driven and will compound returns for years. Burry’s bear case is that the investment cycle has outrun the revenue opportunity — that financing arrangements within the AI ecosystem are circular and fragile (his original Nvidia critique), and that a correction triggers when the gap between AI spend and AI revenue becomes undeniable to the market. His Caterpillar and Tesla additions extend the short beyond pure-play chip and software stocks to industrial proxies for the AI capex cycle, broadening the thesis to cover the entire AI infrastructure build-out.
What’s Next?
Burry’s track record on timing is famously imperfect — he was “too early” on his housing short before being proven right. His November AI shorts are showing modest results at best on Nvidia (-5%), with Palantir the exception (-40%). The SOXX puts expiring in March give him a defined timeline: if chip stocks haven’t corrected meaningfully by then, those options expire worthless. The real test of his thesis may come when major AI companies start reporting revenue data that either validates or refutes the ROI case for hundreds of billions in infrastructure spend. Thursday’s payrolls report and any shift in Fed rate expectations could also influence near-term tech valuations and the viability of Burry’s positions.
Source: The Wall Street Journal
