The ‘Big Short’ investor says Micron’s valuation, technical setup and cyclical history point to significant downside after its AI-driven rally.
- Michael Burry says Micron stock’s rally has reached historically extreme levels.
- He added that Micron/s recent gains have been driven by AI hype and investor FOMO rather than fundamentals.
- Alongside the MU short, Burry added to long positions in PayPal, Sprouts Farmers Market, Zoetis, Fannie Mae, and Freddie Mac.
Michael Burry, ‘The Big Short’ investor, said on Thursday that he has opened a short position in Micron Technology Inc. (MU) while adding to five existing long positions. Burry stated that the memory chipmaker’s rally has reached historically extreme levels, adding that Micron’s valuation, technical setup and long-term cyclical history point to significant downside.
Shares of MU ended the regular session on Thursday 5.50% down, before gaining marginally in after-hours trading. At the time of writing, the MU stock was up 0.15%.
Burry Says Micron Is At A Historic Extreme
Burry said in a Substack post, “Micron defines cyclical like no other,” and added that the stock has suffered 34 drawdowns of more than 30% over the last 42 years. He stated that the company’s shares are now more extended above their 200-day moving average than at any point since 1984, “not even during the dot-com peak.”
He was also critical of Micron’s long-term profitability, stating that its median return on invested capital (ROIC) of 4% and median return on equity (ROE) of 7% are “frankly terrible.” Burry added that “one quarter in every three, Micron is a destroyer of capital,” pointing to decades of negative returns and free cash flow that has been negative nearly “half the time.”
AI Rally And Valuation Raise Concerns
Burry said Micron’s recent rally has been driven by “fear of missing out, greater fool theory, [and] public commitment bias,” rather than “rational analysis.” He also contended that the company is no longer the leader in memory, saying capital spending plans in South Korea largely dictate how much Micron must spend.
On high-bandwidth memory, or HBM, Burry said, “HBM is the new product, but it is just another in a very long series.” He added that the trend fits within his broader AI bubble thesis.
Burry said he shorted Micron directly because “the puts seemed expensive,” adding that he “will look to add puts should the stock settle down and bring volatility down.”
Burry’s Micron short aligns with his broader bearish view on semiconductors. In a June 30 Substack post, he disclosed short positions in Nvidia (NVDA), Applied Materials (AMAT) and the iShares Semiconductor ETF (SOXX), stating that AI-related chip stocks are due for a 30% correction.
Burry Adds To Five Long Positions
Alongside the Micron short, Burry increased stakes in PayPal Holdings (PYPL), Sprouts Farmers Market (SFM), Zoetis (ZTS), Federal National Mortgage Association (FNMA), commonly known as Fannie Mae, and Freddie Mac (FMCC).
Burry disclosed additions to PayPal at $45.31, Sprouts Farmers Market at $89.33, Zoetis at $74.80, Fannie Mae at $6.15, and Freddie Mac at $5.69.
MU Stock: What Stocktwits Retail Sentiment Says
On Stocktwits, retail sentiment for MU was ‘bullish,’ with message volume being ‘high.’ In the past 90 days, message volume around the stock has surged by 260%, while its retail watcher base gained 4.1% in the same period.
The MU stock has gained a whopping 248% year-to-date.
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