Why Michael Burry just sold all his tech stocks

Past performance isn't a reliable indicator of future results

Now Burry is signaling another major shift in his market outlook. In Q1 2025, Burry revealed a massive short position on Nvidia, valued at over $100 million as of March 31st. It came at a time when Nvidia's dominance in AI chips had pushed its valuation into the stratosphere, and when concerns about US tariffs on tech exports to China were starting to mount.

Whether it was a pure valuation call or a hedge against tariffs, the timing couldn't have been better. By the end of that quarter, Nvidia's stock had dropped nearly 23%, meaning Burry's position likely produced a nice profit. Now, in his Q2 2025 filing, that Nvidia position was gone.

It seems Burry completely stepped away from the mega-cap tech names that powered the market higher over the last couple of months and instead added some very interesting names that we'll be taking a look at.

So, why is Burry staying away from US tech, the market's strongest sector?

True to form, he isn't afraid to go against the crowd when he perceives excessive risk. This contrarian approach is why so many investors follow his moves. And right now, two major factors seem to be driving his caution.

The first factor is inflated stock valuations. The S&P 500's price-to-earnings (P/E) ratio, a key indicator of how expensive the market is, has reached concerning levels. The last time the market was this expensive was during the peak of the dot-com bubble in the late 1990s, a period that ended with painful losses for those invested in overvalued stocks. The only other time it reached these heights was briefly in 2021, fueled by massive pandemic stimulus and near-zero interest rates.

Burry could potentially view this as a poor risk-reward scenario, believing US stocks have limited upside potential but significant downside risk.

The stock market is facing extreme concentration risk

Beyond high valuations, the other factor is that the stock market is facing extreme concentration risk. This occurs when a small number of companies dominate an index, making it vulnerable. Currently, the top 10 stocks constitute a staggering 39% of the S&P 500, far exceeding the peak seen during the dot-com bubble when it reached just over 25%.

This means the entire market is susceptible to weakness in just a handful of names. In fact, Nvidia alone now accounts for over 8% of the S&P 500's market cap—the largest single stock weighting ever recorded. Think of high market concentration like a table standing on just one or two legs. As long as those legs remain strong, the table is stable. But if one of them breaks, the whole structure can collapse. A well-diversified market, like a table with many legs, is inherently more stable.

Of course, stocks can remain overvalued and market concentration can stay elevated for long periods. Burry likely knows this. So rather than trying to perfectly time a market top, he appears to be taking a more defensive approach.

So where is he moving his capital?

Looking only at Burry's long positions, his portfolio now shows a significant shift towards call options and defensive stocks. Two of the top positions are large healthcare companies, UnitedHealth and Regeneron, whose stock prices have seen substantial declines. These companies are trading at decade-low multiples, and their stock prices have lately taken a huge beating.

Amidst a whirlwind of scandals, UnitedHealth's stock has declined 50% since its recent peak in April. Regeneron has fared worse, falling over 60% since its peak in August of 2024. Despite these declines, demand for healthcare tends to be stable, so Burry may be bullish based on healthcare's evergreen demand.

They're also supported by a powerful tailwind: rising healthcare spending as a share of the national GDP. National health spending has been on the rise for decades, and this, of course, bolsters profits for healthcare and pharmaceutical companies like UNH and Regeneron.

But Burry isn't stopping at healthcare. He's also opened a $12 million long position on Lululemon based on what he seems to believe is overlooked value. Lululemon's stock has fallen 60% from its 2024 peak due to growth concerns, creating a potential entry point for a contrarian investor.

But Burry seems to think the stock will bounce back. And there are a couple reasons it could. Although nothing is guaranteed and nobody knows what'll happen next, analysts have noted that a recovery in the stock could potentially be driven by two key catalysts.

• First, retail stocks like Lululemon benefit from a strong consumer with money in their pockets. And as central banks potentially lower interest rates, reduced borrowing costs could lead to a rebound in consumer spending that benefits established athleisure companies like Lululemon.
• The second factor is that Lululemon is planning an aggressive expansion in China. This move is timed to potentially capitalize on the country's massive economic stimulus programs designed to boost its economy. As China's economy recovers, their priority is to boost consumer spending. And more Lululemon stores in China could boost profits and the company's stock price.

There are signs of hope for Lululemon already. Despite their falling stock, the company's free cash flow has been growing year-over-year, reaching impressive positives lately. That's the amount of money they have left over after operating expenses and maintaining capital assets.

In conclusion, Burry's strategy reflects a calculated pivot

He appears to find undervalued defensive sectors more attractive than hyped-up technology stocks. His new portfolio balances a conviction for finding value with a caution against overconfidence, acknowledging that markets can remain irrational longer than anyone expects.

But even seasoned and respected investors like Michael Burry can be wrong, and only time will tell if his analysis bears fruit. This analysis is based on his public filings as of June 30th, 2025, and his positions may have changed since then.

At Capital.com, we'll continue to keep you updated on portfolio moves by major investors like Michael Burry. Explore more insights in our Educational Hub.

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