Michael Burry’s Short Call Dents Caterpillar’s AI-Fueled Rally

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(Bloomberg) — Caterpillar Inc. stock slid from a record high Wednesday after Michael Burry, made famous in The Big Short for his bets against the US housing market ahead of the 2008 crisis, said he shorted the industrial heavyweight for the first time. 

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The call comes as the bulldozer maker has rallied more than 150% over the past 12 months, since its power equipment business was tied to the artificial intelligence buildout. Burry sees this run coming to an end, while also calling time on a few other AI-driven stocks.

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Caterpillar “has always done great for me on the long side in the past,” the famed investor wrote in a Substack post announcing a short position at $1060.98. The stock was down nearly 7% Wednesday after closing at an all-time high of $1,064.90 the day before. It has rallied over 70% so far this year. 

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The massive amount of heavy equipment and energy generation needed to power data centers has made picks-and-shovels stocks like Caterpillar behave like chipmakers. 

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Burry is shorting those, too. In his post after the market closed Tuesday, he said he also took short positions in Nvidia Corp., Applied Materials Inc. and the iShares Semiconductor ETF, known by its ticker SOXX, in addition to Tesla Inc. With the exception of Tesla, all of these securities also declined Wednesday. Applied Materials dropped more than 11%, having gained nearly 150% this year; the SOXX fell more than 6%, after doubling in value this year, and Nvidia slid 3.3% before paring losses.

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Investors have been questioning how much further the rally can go, after chip stocks posted their best quarter ever, bolstered by surging demand for AI equipment. The Philadelphia Semiconductor Index rose 88% in the second quarter, and soared 101% in the first half, putting it on track for the best year in its history. 

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“The SOXX itself is a pure form of overvaluation in an index, a form that is rarely seen and never so easily recognized as such,” Burry wrote. In April, Burry said that he bought puts on the SOXX, which was a new position at the time. Aside from the ETF, the Philadelphia Semiconductor Index is also at a “historically high extension above its 200-day moving average, a level not seen since 2000,” he said. 

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While Burry’s latest positions seem to be a bet against AI, his bearish view of Tesla isn’t new. Back in December, Burry had called Tesla shares “ridiculously overvalued,” and said shareholder dilution was set to continue after a proposed $1 trillion pay package for Chief Executive Officer Elon Musk. 

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Tesla shares closed at $420.60 on Tuesday, having dropped over 5% this year. In 2018, Musk tweeted that he was “considering taking Tesla private at $420,” setting off a firestorm. 

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—With assistance from Jordan Fitzgerald, Carmen Reinicke and Angel Adegbesan.

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