Michael Burry has altered his investment strategy regarding the artificial intelligence sector, moving away from outright short positions toward long-dated put options. This shift centers on the iShares Semiconductor ETF (NASDAQ: SOXX), which Burry previously had a short position in.
Burry recently closed his SOXX short and replaced it with September 2027 put options with strike prices in the low $400s. He applied a similar strategy to other major names, including Nvidia Corp (NASDAQ: NVDA), Micron Technology (NASDAQ: MU), Palantir Technologies (NASDAQ: PLTR), Nebius Group (NASDAQ: NBIS), and Oracle Corp (NYSE: ORCL). In a Substack post, Burry stated he has become more confident that the AI bubble could burst "sooner than later."
The timing of this move coincides with a significant pullback in the semiconductor sector. SOXX fell 11% during the third quarter, marking its weakest quarterly performance since March 2025. Despite the decline, SOXX remains a key gauge for the AI buildout. The fund holds 30 companies, manages approximately $48.4 billion in assets, and trades at a trailing P/E of nearly 68. Semiconductors comprise 82.3% of the portfolio, with the remaining 17.6% allocated to semiconductor equipment.
Burry’s thesis suggests that increasingly powerful AI models could eventually require less computing power, challenging the assumption that greater AI adoption automatically leads to exponentially higher chip demand. However, recent data from the sector presents a counterpoint. Micron Technology reported that customers have increased commitments under long-term supply agreements to $32 billion and secured most of its 2027 High Bandwidth Memory (HBM) output. The company also noted that data-center SSD revenue nearly topped $10 billion in fiscal Q4, more than 10 times the level from the previous year.
The debate surrounding SOXX is now focused on whether AI efficiency will ultimately reduce chip demand or simply create capacity for the next wave of applications. This tension is highlighted by S&P Global estimates that Alphabet Inc (NASDAQ: GOOGL), Amazon.com, Inc (NASDAQ: AMZN), Meta Platforms, Inc (NASDAQ: META), Microsoft Corp (NASDAQ: MSFT), and Oracle will collectively spend about $750 billion on capital expenditure in 2026, equal to 38% of their revenue.
