Michael Burry is betting against Micron, even though the stock trades at a low multiple of expected earnings. According to Motley Fool, he expects the memory-chip cycle to reverse and questions the circular financing behind the AI build-out.
Michael Burry, the investor profiled in The Big Short, is betting against Micron, one of the high-profile AI stocks he is skeptical about today.
Micron looks cheap on earnings
Micron trades at just 5.4 times this year's expected earnings, with a one-year forward P/E ratio of roughly 4.6. The S&P 500 sits somewhere around 19 on the same measure.
In the fourth quarter of fiscal 2026, which ended on Sept. 3, Micron posted adjusted EPS of $33.42, above the average analyst estimate of $31.61. Adjusted EPS rose 1,003% year over year, and sales rose 379% to $54.2 billion.
Why Burry expects a reversal
However, memory is a business with a history of wide cyclical shifts. Demand for high bandwidth memory chips used in AI processors has pushed prices and margins sharply higher amid a shortage. Burry is betting that this imbalance will follow its historically cyclical pattern and reverse.
He has also raised two further risks. The first is circular financing deals across the AI industry, where companies make business deals, partnerships and equity investments with each other while AI leaders pour money into capital expenditures. The second is the rise of Chinese memory-chip makers, which could dampen Micron's pricing power and might end the memory shortage sooner than some predict.
Motley Fool's Keith Noonan writes that Burry's bet does not necessarily mean investors should sell or avoid the stock. But he adds that not considering the risk factors Burry highlights would be a mistake.
Source: Motley Fool
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