Michael Burry, the investor famed for his role in "The Big Short," recently disclosed on his Substack platform that he has initiated a new short position by acquiring put options on the iShares Semiconductor ETF (SOXX). These options are set to expire in January 2027 with a strike price of $330. This strategic move coincides with the Philadelphia Semiconductor Index achieving a record-breaking 18 consecutive trading days of gains. Burry anticipates a future pullback for the index, arguing that the current surge is primarily driven by technical factors rather than strong fundamental support. He maintains a cautious outlook, especially amidst the dominant market theme of chip shortages fueled by large-scale data center expansion.

Burry attributes the historic winning streak of the Philadelphia Semiconductor Index to technical momentum instead of robust underlying fundamentals. His pessimistic view emerges just as the core market narrative emphasizes chip shortages, particularly those related to massive data center growth. Burry's strategy indicates his belief that these technical drivers are unsustainable in the long run, suggesting the sector may be headed for a correction.

SOXX Deemed Significantly Overvalued, Suggesting Correction Could Be Near

The iShares PHLX SOX Semiconductor Sector Index Fund is a major semiconductor ETF, managing approximately $30.7 billion in assets. According to GuruFocus data, SOXX has a GF Value™ of $279.00, while its current price is $461.60, indicating the ETF is overvalued by 65.4%. This significant disparity suggests a lack of adequate safety margin for potential investors. Furthermore, SOXX's trailing price-to-earnings ratio is a relatively high 39.85 times, raising questions about the sustainability of its current valuation. Over the past three months, there have been no reported insider buying or selling activities for SOXX.

Burry's Recent String of Warnings: "Too High, Exercise Caution"

Since April, Burry has publicly shared several significant market perspectives. On one hand, he stated that the current rally in U.S. stocks is not necessarily headed for an immediate, severe crash. On the other hand, he used data to argue that Wall Street has systematically overestimated the true earnings of major technology giants by more than 40% over the past decade, with retail investors now bearing the cost. Late last year, Burry announced he no longer manages client funds, focusing instead on his personal investments and sharing strategies via Substack. He has long expressed skepticism toward the AI boom, repeatedly warning about excessive valuations, questionable accounting practices, overinvestment, and circular trading. Last week, Burry noted that a "spike top" pattern—a sharp vertical rise followed immediately by a steep decline—is extremely rare, suggesting a more volatile and choppy market trend is more probable. On Friday, as the S&P 500 closed at a record high of 7,126 points, he posted that "markets never have spike tops," adding, "Being short is not always right."