Burry Bets Against Chip Shortage as Nasdaq-100 Hits 30,732
Michael Burry expands shorts on Micron and Palantir, citing Chinese capacity growth. The Nasdaq-100 closed at a record high of 30,732.
Key points
- Michael Burry added short positions to Micron, Nebius, Palantir, and the SOXX ETF, betting against the current chip shortage.
- Burry argues that increasing Chinese memory production capacity will end the shortage and trigger a down cycle in prices within two years.
- Micron's forward free cash flow is $130 billion, up from $4.7 billion in November, but faces pressure from potential Chinese supply surplus.
Michael Burry increased short positions on memory and software stocks. He argues the current chip shortage is temporary. The Nasdaq-100 hit an all-time high of 30,732 on Tuesday. Burry believes production capacity is catching up. He expects a down cycle in memory prices within two years.
Burry added shorts to Micron Technology and Nebius Group. He also targeted the SOXX semiconductor ETF and Palantir. These bets rely on the view that AI demand will not sustain high prices. Burry wrote that the shortage will blow off as supply increases. He plans to cover these positions if prices rise further.
Chinese capacity threatens chip prices
Burry cited a report from a Taiwanese media outlet. Acer CEO Jason Chen stated Chinese production is increasing. Chen noted there is no continuous shortage issue. Contract prices are fluctuating at high levels. Some prices are rising while others are falling.
Economists at the Center for Strategic and International Studies agree. They warned of a potential memory glut due to Chinese output. Expanding DRAM and NAND production may ease near-term pressure. However, it could create future surplus and trade friction. This increases dependence on Chinese suppliers for key devices.
Micron faces margin pressure risks
Micron Technology is based in Boise, Idaho. The company is building several new plants in its home state. It is boosting capital spending to meet demand. Micron has high profit margins and strong pricing power. Forward free cash flow stands at $130 billion.
This figure compares to $26 billion in May. It was $10 billion in February of last year. In November, the figure was $4.7 billion. Data comes from FactSet. Additional Chinese capacity could pressure Micron's future earnings. The company relies on high pricing power for cash flow.
Index dispersion signals broad weakness
Burry described the Nasdaq-100 as historically overvalued. He called the index top-heavy in a recent post. The index gained nearly 1% on Tuesday. It closed at a record 30,732. This marked the fifth gain in six days.
BTIG analyst Jonathan Krinsky noted increasing dispersion within the index. The percentage of names above their 200-day moving average fell. It dropped from 77% to 56% since mid-August. This suggests stock selection is now more important. The overall AI trade is less robust than it appears.
Burry also increased long positions in other stocks. He bought more QXO, Build-A-Bear, and Sprouts. He added Birkenstock and MercadoLibre to his portfolio. He described these prices as attractive after significant corrections. These are now full positions for him.
