Michael Burry Is Short the iShares Semiconductor ETF. The Fund Has Still Gained 73% in 2026.

Michael Burry was one of the first investors to spot the subprime mortgage crisis before it became a full-fledged economic fiasco, earning acclaim for his prescience. As such, when he opines on various segments or specific stocks, investors listen.

So it's understandable that, in the wake of his recent revelation that he's short the iShares Semiconductor ETF (NASDAQ: SOXX) and some of that exchange-traded fund's (ETF) largest holdings, that some market participants are unnerved. After all, semiconductor stocks have been among the primary drivers of the current bull market. Plus, they're hard to avoid.

Own a basic S&P 500 index fund? Three chip stocks, including Nvidia (NASDAQ: NVDA) and Micron Technology (NASDAQ: MU), which are two of Burry's short positions, are among the top 10 holdings.

Michael Burry is bearish on this iShares ETF, but investors don't have to follow along. Image source: Getty Images.

It's relatable that investors are concerned about Burry's bearish views on the iShares ETF, but that doesn't mean all market participants should blindly follow his chip moves.

He's right... for now

Two points are making semiconductor bulls more nervous. First, the iShares ETF isn't some small, overlooked fund. It's a $45.8 billion giant, the second-largest in the category. Second, Burry's bearish bet on the fund is validated by the fund's 18.4% decline over the past month.

Still, we're talking about a fund that's up 74% year to date, making it one of the best semiconductor ETFs, which means anyone shorting this fund needs to be nimble and not "fight the tape." As for what Burry sees, some of it boils down to valuation.

He says the iShares ETF trades at a rich 16 times price-to-sales ratio, and even if Nvidia is excluded, that multiple barely nudges lower. With Micron, he sees a notoriously cyclical stock that's subjected investors to dozens of bear markets over its four-plus decades as a public company.

The history of memory chip stocks, including Micron, is famously cyclical. And there's no denying Micron shed a quarter of its value over the past month, tumbling into a bear market. So Burry is right on that stock at the moment. Still, his critics contend that he's relying on an outdated playbook, one that doesn't account for the possibility that this time may be different, given that high-bandwidth memory (HBM) is essential to artificial intelligence (AI). That status doesn't mean Micron and this ETF will move up in a straight line. Clearly, they won't, but AI wasn't a factor in past memory chip cycles. This time around, it is.

Not a reason to ignore SOXX

When it comes to Nvidia, a stock that is the second-largest holding in the iShares Semiconductor ETF, the investor claims some AI infrastructure companies use depreciation schedules that far exceed the usefulness of their products. Said another way, Burry believes Nvidia and some peers use four- to six-year depreciation schedules, even though their chips are obsolete in 12 to 18 months.

Nvidia CEO Jensen Huang rebuffs that notion, noting his company's AI infrastructure is durable and retains significant value over the products' lifespans.

It's worth noting that Burry's aforementioned short positions are getting an assist from investors looking beyond tech stocks. Market breadth is widening, and that's a good thing. Something else to consider: Burry may remain near-term correct on chip stocks, but that could open the door to a longer-term opportunity with the iShares ETF.

Todd Shriber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology, Nvidia, and iShares Trust-iShares Semiconductor ETF. The Motley Fool has a disclosure policy.