Short sellers lost $80B in November; Was Michael Burry among them?

The past few weeks have proven to be a relentless ordeal for those daring to bet against the resilience of the US stock market. 

Short sellers, anticipating a prolonged downturn, were blindsided as the S&P 500 Index orchestrated a comeback, delivering its most robust surge since July 2022. The repercussions were swift and severe, with mark-to-market losses exceeding a staggering $80 billion in November, according to Barchart, citing data by S3 Partners LLC. 

This marked the most substantial blow since January when US stocks staged an impressive comeback from their 2022 lows. 

Among the notable figures who have taken a bearish stance is Michael Burry, a luminary in the investment world, whose wagers against both the broader market and the specific tech sector faced unexpected turbulence.

Is Michael Burry on the losing side?

The short answer is – very likely. 

After closing his bearish position against the S&P 500 and Nasdaq 100 at a significant loss, Q3 securities filings revealed that Burry then bet against iShares Semiconductor ETF (SOXX) – one of the biggest semiconductor exchange-traded funds (ETFs).

Since November 1, SOXX gained around 14%, outperforming the broader S&P 500 which rose about 8.4% during the same period.

Amidst the ongoing frenzy around artificial intelligence (AI), semiconductor companies are seeing unprecedented demand for their graphics processing units (GPUs). The reason for this is that these chips are used for powering popular generative AI services like OpenAI’s ChatGPT.

The leader in the AI chip market is Nvidia (NASDAQ: NVDA), which gained more than 10% since the start of November and a staggering 226% since the beginning of 2023. 

Other chipmakers that are part of the SOXX index such as Intel (NASDAQ: INTC), AMD (NASDAQ: AMD), and Kla Corp (NASDAQ: KLAC), also registered noteworthy gains. 

The technology sector has been on an overall uptrend since the very beginning of 2023 amid the AI boom, however, the rally accelerated after the Federal Reserve on November 1 kept rates unchanged for a second consecutive meeting.

As a result, equity prices surged on growing convictions that the Fed approached the end of its rate-hiking campaign, inflicting substantial losses upon short sellers.

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