On June 30, Burry disclosed shorts against Nvidia, Applied Materials, Caterpillar, Tesla and the iShares Semiconductor ETF (SOXX), a fund that holds Nvidia, Micron and other microchip stocks. The next day he added Micron Technology, posting (4) that it “defines cyclical like no other.” He argues that Micron has taken 34 drops of more than 30% in 42 years, and its long-run returns on capital are “frankly terrible (5).”
First, a quick note about the AI story so far. As mentioned, stocks in this sector have led indexes higher through this bull market, with the S&P 500, the Nasdaq Composite, and the Dow Jones Industrial Average climbing in the double-digits over the past three years. Investors have flocked to these companies, seeing them as leaders in the next big thing in technology – and investors have scored a win in many cases as revenue and stock performance have taken off.
*But Burry and others have expressed concern that the huge investments in AI today may not match the long-term revenue opportunity. *
Burry was early with his prediction ahead of the subprime market crash. But, when Burry sees signs that suggest such a transition might be ahead, he takes action – and he clearly doesn’t count on participating in every stage of a particular rally.
So, today, some investors are betting AI stocks have room to run, while Burry takes a bearish stance.
Michael Burry still holds a bearish bet against Oracle (NYSE: ORCL), dismissing as “fake news” reports on July 18 that he had fully exited his short position. “This is fake news. I covered half because winning,” the investor wrote on X, pushing back against coverage from outlets that had declared his six-month Oracle bear campaign over.
In a Substack post, Burry elaborated: he sold half of his Oracle January 2027 puts, which were struck in the low-to-mid $100s, because the position had grown “too big.” He added that he does not “fall in love with options trades that go well” and was explicit that he retained meaningful exposure: “I maintained short exposure here by retaining half.” Media reports appear to have misread that partial trim as a full exit, prompting his public correction.
His bear thesis centered on Oracle’s aggressive AI infrastructure spending, what he viewed as questionable financing, and heavy customer concentration around OpenAI. That thesis has since received institutional backing: S&P Global Ratings cut Oracle’s credit rating to BBB- on July 9, one notch above junk status, citing extreme concentration risk from OpenAI, which represents roughly half of Oracle’s $638 billion backlog, alongside a projected free cash flow deficit of $42 billion in fiscal 2027.
I wonder if Blurry will consider shorting Space X?
Short sellers targeting SpaceX shares are sitting on an estimated $15.5 billion in paper profit since the rockets-to-AI firm’s mid-June initial public offering, as its stock slipped below the IPO price, according to data through Tuesday from analytics firm Ortex Technologies.
On Wednesday, the stock dropped to a new low of $115.26.
“There is no sign of short sellers taking profits on SpaceX,” Ortex co-founder Peter Hillerberg said.
“If anything they are leaning in harder,” Hillerberg said.
I wonder, though, what proportion of this is just short sellers providing the liquidity to the market that SpaceX deliberately held back.
SpaceX went to IPO with a very tiny allocation of shares. About 5%, IIRC - pretty small for an IPO generally, and certainly providing a lot fewer shares than there was demand for. So there’s a paucity of shares to buy in SpaceX now. Supply is too low for demand.
But that’s just a time problem. Right after the next earnings report, there’s going to be a ton more shares available to trade. Two days after earnings, one of the lockups expires, and there’s going to be another several hundred million shares. More shares get released in that lockup expiration than were in the IPO.
Some fraction of the short interest is folks solving this problem. Buyers want SPCX shares, and are willing to pay a bit of a high price, but there aren’t enough available. So the short sellers come in and sell them the shares. That way people get the supply that they demand. Meanwhile, in a few weeks there will no longer be a supply constraint, and there will be a lot more shares to buy - so then some of the short sellers will come in and close their positions with that new batch of supply.
So some of the short-selling is just this timing trade that smooths out the liquidity in shares that SPCX created. Rather than SPCX shares trading super-high while there’s a shortage of shares and then crashing on lock-up expiry day, the short-sellers move those shares “forward in time” and take a premium for providing that liquidity (and for their risk). Same thing probably happened with the index inclusion trade. Not all of it - some of these guys are probably taking a longer-term positional bet against the company. But some of it is just the markets doing what markets do, and just selling short into the time period where there’s share scarcity and then buying long when there’s more supply.
Why SpaceX’s Earnings Will Likely Be Followed by a Wave of Stock Sales
A series of lockup expirations could unleash stock sales dwarfing the IPO, leading index funds to have bigger weights in the volatile stock.
Two days after SpaceX earnings are released, most pre-IPO investors will be eligible to start selling the stock.
Of course, it’s unclear how many of those shares will actually be sold. But Nicolas Owens, an equity analyst covering SpaceX at Morningstar, says a wave of selling is likely. “We believe that most of the available shares will come to market, because the existing sellers have low cost basis and long holding periods,” he says.
This steady flow of potential stock sales could weigh on SpaceX’s stock price, and as the number of shares in the public market increases, some index fund investors will find that SpaceX is becoming a greater share of their portfolio.
Like just about everything else with the SpaceX IPO, the scale of the lockup sales is unusual. The average IPO typically sells about 20% of its shares, explains Matthew Kennedy, senior strategist at Renaissance Capital. “SpaceX floated about 5% of its shares, so there are a lot more shares locked up here than a typical IPO,” he says. “It makes sense, given the size of the company, but it’s a large technical overhang nonetheless.” It’s not just the number of shares that will be sold that is unusual. “SpaceX has the longest series of lock-up releases we’ve ever seen,” Kennedy says.
If sold, total lockup shares would quickly surpass the number of shares issued at IPO.