Is Michael Burry’s high-stakes short against Applied Materials about to pay off, or will the AI boom trigger a massive squeeze?
Why is the Applied Materials Michael Burry short working?
The core thesis behind the Applied Materials Michael Burry short rests on the belief that semiconductor equipment valuations had climbed to unsustainable levels. When Burry initiated his bearish bet, the stock was trading near its peak of $729.40. Since then, the stock has steadily declined, dropping past the $562.80 mark and now hovering near $516.50, representing a substantial decline of nearly 30% from its highs.
At its peak, the company traded at a trailing price-to-earnings (P/E) multiple of 52.9x, a premium that many conservative investors found difficult to justify. While semiconductor manufacturers like NVIDIA have captured the market’s imagination, the companies that supply the machinery to build these chips carry a unique set of cyclical risks. When the broader market begins to question whether the massive capital expenditure on artificial intelligence will yield short-term profits, equipment suppliers are often the first to feel the squeeze.
What global risks face Applied Materials?
Beyond valuation concerns, the Applied Materials Michael Burry short is supported by shifting geopolitical and macroeconomic dynamics. One of the most prominent threats to the company’s long-term order pipeline is China’s aggressive push toward domestic self-reliance. Recent reports indicating that a Chinese firm has commenced mass production of domestic chip-making machinery have sent shockwaves through Western equipment manufacturers. This shift could significantly reduce China’s reliance on foreign suppliers like Applied Materials.
Additionally, there are growing fears that global memory chip manufacturers may have pulled forward their capital expenditures too aggressively. If the current memory boom cools down, equipment orders could dry up rapidly. Some market analysts suggest that investors seeking exposure to the semiconductor space might find cleaner, lower-valuation opportunities directly within memory manufacturers rather than relying on the equipment suppliers that sit one step removed from actual chip production.
How are options traders and politicians reacting?
Market sentiment remains highly divided, as reflected in recent options activity and political disclosures. Today, options traders showed notable bearish sentiment toward Applied Materials. A bearish put option sweep was detected for contracts expiring on January 15, 2027, at a strike price of $130.00. Furthermore, trading volume surged for the $450.00 strike put option expiring on July 31, 2026, with over 2,250 contracts changing hands, representing a significant portion of the daily volume.
In contrast to this bearish options activity, some institutional and political buyers are stepping in. Recent financial disclosures revealed that Democratic Representative Jared Moskowitz purchased shares of Applied Materials alongside his investment in SpaceX during its recent initial public offering. This divergence in behavior suggests that while short-term traders are hedging against further downside, some long-term buyers still see value in the company’s fundamental role in the global technology supply chain.
Related Coverage
For investors tracking the broader semiconductor sell-off, analyzing individual stock movements is crucial. The recent market pressure is detailed in Applied Materials Price Target: Stock Drops 2.8% Despite AI Boom, which explores how analyst upgrades are battling macroeconomic headwinds. Additionally, the wider impact on chip designers can be seen in AMD Earnings Drop -6.9%: Can AI Scaling Defy the Sell-Off?, highlighting how even major players are struggling to maintain their momentum amid shifting investor expectations.
The ongoing correction in the semiconductor sector has validated the Applied Materials Michael Burry short strategy as the stock continues its downward trajectory toward $516.50. For long-term portfolios, this correction serves as a reminder of the cyclical risks inherent in high-multiple technology hardware stocks. As global supply chains adjust and AI capital expenditures are scrutinized, the next few months will determine whether Applied Materials can find a stable floor or if the bearish momentum will drag the stock even lower.
