"Big Short" Michael Burry announced his latest holdings on the same day, then published an article on Substack warning of a U.S. stock market crash risk.
(Prior context: Big Short Michael Burry reveals latest holdings: adds short position in Micron (MU) at $880)
(Bonus context: Goldman Sachs: Deleveraging Isn't Over Yet! CTA Loses $24.9 Billion; Corporate Buybacks Are the Only Support in August)
The U.S. renowned "Big Short" author Michael Burry, after publicly disclosing his latest positions, published a new article on Substack warning that U.S. stocks are on the brink of a rapid collapse. Burry pointed out that the driver of this "sell-off" is not deteriorating fundamentals, but a chain reaction caused by Wall Street quantitative funds automatically responding to market volatility.
The "automatic sell" mechanism of quantitative funds
Burry explicitly mentioned in his August 4 article that volatility-focused funds are triggering a wave of automated sell-offs. These funds rely on quantitative strategies to detect market volatility in real time and automatically adjust positions, creating a "sell-more-as-it-falls, falls-more-as-it-sells" cycle in environments of rising volatility.
He specifically highlighted Wall Street’s active quantitative funds—these funds do not passively track indices but instead use algorithms to continuously scan market signals and automatically reduce positions when volatility rises. Burry described these funds as invisible “magnifying glasses” in today’s market, where volatility far exceeds historical norms.
Momentum stocks led the decline first.
The recent crash in momentum stocks serves as the best evidence: momentum stocks are those whose prices surge rapidly over a short period. In recent weeks, as investors took profits, memory manufacturers and chip companies that had seen sharp price increases faced massive sell-offs.
- iShares MSCI USA Momentum Factor ETF (MTAW) is down 14% from its recent high.
- Micron (MU) was also shorted by Burry at $880 on the same day.
- SK Hynix fell 3.88%, NVIDIA fell 1.33%, and Broadcom fell 2.01%.
Goldman Sachs also released an analysis today pointing out that CTA deleveraging is not yet complete, estimating a sell-off of $24.9 billion during the downturn, with corporate buybacks now the sole support in August.
What’s different this time compared to 2025?
Burry’s current warning aligns with his view at the beginning of 2025, when he noted that AI-related stocks had surged by 784%, exceeding the gains seen during the internet bubble. He now further identifies the mechanism driving the rally: quantitative funds using algorithms to lock in momentum trends, which can reverse and rebound even faster once they turn.
Unlike the 2019 "Big Short" period, when Burry bet on a wave of mortgage defaults, this time his short position targets a broader issue: structural fragility in the market, where vast amounts of capital are concentrated in a few quantitative strategies, making it vulnerable to cascading sell-offs if volatility increases.
For Taiwanese investors, this chain reaction of momentum stock selling is also worth noting. The U.S. tech sector has a very high correlation with local semiconductor companies such as TSMC and MediaTek. When momentum funds reduce their positions in U.S. AI hardware stocks, Taiwan’s supply chain typically faces synchronized pressure. At the open this Monday, after the three major U.S. indices opened higher, AI hardware stocks were the first to come under pressure: the Dow Jones rose 1.06%, but NVIDIA, TSMC, and Broadcom all declined.
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Big short Michael Burry reveals latest holdings: added short position in Micron (MU) at $880