Burry Increased His Bets Against the Nasdaq 100 and Chipmakers Following the Resignation of Nvidia's CEO

Financial guru Michael Burry, known as the inspiration for one of the characters in "Short Selling," has increased his bet on a decline in the tech market following Jensen Huang’s departure as CEO of Nvidia and reports of U.S. Department of Justice investigations into the company. Burry believes that the leading chipmaker’s problems could trigger a major correction in the sector, he wrote in a new post on Substack.

At the same time, the investor acknowledged that competitors and major chip buyers could benefit: “Against the backdrop of Nvidia’s decline, Broadcom and AMD stand out as competitors and beneficiaries. Both stocks are rising today. In the short term, this makes perfect sense.” Huang’s resignation also plays into the hands of the chipmaker’s customers: if the company weakens, it will become easier for hyperscalers to negotiate favorable terms for chip purchases—they will have more leverage in negotiations, according to Burry.

To bet on a decline in the broader sector, he chose the VanEck Semiconductor ETF. It includes shares of 25 semiconductor manufacturers, with Nvidia accounting for 18% of the fund’s assets and TSMC for 10%, Broadcom accounts for 6.13%, and AMD for 6.04%. At the close of trading on November 12, this ETF’s price had fallen by about 1%: it had lost more than 4% in the morning but recovered most of the decline by the close.

Burry reported that he had restored his previously reduced 25% position in put options on the VanEck Semiconductor ETF—contracts that allow investors to profit from a decline in the asset’s value. The instruments he purchased expire in June. At the same time, the investor noted that in the short term, the VanEck Semiconductor ETF may not be the best option for betting on a decline in the semiconductor sector, as the fund’s largest holdings compete with one another. However, Burry still expects a significant decline in stock prices across the industry, partly due to a potential drop in corporate earnings over the next two years.

As an alternative, Burry is considering the iShares Semiconductor ETF, but considers it a less suitable investment: AMD and Broadcom account for the largest shares in the fund, and its price remained virtually unchanged on November 12.

In addition, Burry took advantage of the Nasdaq 100’s rebound from the 27,000-point mark to double his position in put options on the index, betting on a decline. However, the financier acknowledges that, for now, shares of the largest tech companies are propping up the Nasdaq 100, partially offsetting Nvidia’s decline.

On the morning of November 12, Burry advised investors to sell Nvidia shares because Jensen Huang’s departure could undermine the financing and sales structure that had driven the company’s high growth rates and profitability. He believes the company’s upcoming quarterly earnings report will be strong and sees this as a good opportunity to exit the chipmaker’s stock—before the effects of Huang’s departure impact the financial results.

This article was AI-translated and verified by a human editor