Investor Michael Burry disclosed a basket of short positions against Tesla, Nvidia, and the semiconductor sector on June 30, betting against what he called an overheated AI cycle and pure overvaluation in chip stocks. Days later, the Philadelphia Semiconductor Index suffered its steepest single-day fall in recent memory on July 2, with memory and storage stocks hit hardest, while Tesla fell 7.5% the same day. The selloff was partly triggered by reports that Meta is leasing out surplus AI data center capacity, signaling that compute supply may be catching up with demand, and underscores broader concerns about stretched valuations in AI-related equities.
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Days after investor Michael Burry disclosed shorts against Tesla, Nvidia, Caterpillar, Applied Materials, and the semiconductor sector on June 30, several of those stocks began falling sharply. On July 2, the Philadelphia Semiconductor Index dropped more than 6%, its steepest single-day fall in recent memory, with memory and storage names hit hardest—SanDisk sank almost 20% over five sessions. Tesla fell 7.5% that same Thursday, despite reporting Q2 deliveries of 480,126 vehicles above consensus.
Why it matters
Burry framed his positions as a single bet against an overheated AI cycle, calling the semiconductor index "a pure form of overvaluation" and comparing conditions to the dot-com era. The Philadelphia Semiconductor Index was trading more than 65% above its 200-day moving average when he made his call. While the immediate chip selloff traces to reports that Meta is building a business to lease surplus AI data center capacity—read by investors as a signal that compute supply may be catching up with demand—the timing underscores growing skepticism about stretched valuations in AI and semiconductors.
What to watch
Whether this marks the start of the correction Burry is positioning for should become clearer as Tesla's July 22 earnings and the next round of AI capital expenditure commentary land. Burry rolled his semiconductor puts out to March 2027. Caterpillar, his other first-ever short, still trades at a trailing price-to-earnings ratio of 53.
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