Is Burry about to be proven right?

Dear Fellow Investor,

Good morning. Happy Sunday!

I hope you’re enjoying the weekend. I know I am.

But first, let’s talk about Michael Burry — one more time.

On Friday, I told you why I’m not going short Micron, even though I agree with Burry on the fundamentals.

Right on the facts. Wrong on the timing. That was the Larry Tisch lesson.

Well, this week we get our first real test.

Micron reports earnings on Wednesday, after the close.

So it’s a fair question to ask: “Dylan, is Burry about to be proven right?”

Let’s dig in.

Quick recap for anyone who missed Friday.

Larry Tisch, the founder of Loews, shorted the market from 1996 to 2000.

He was right about valuations.

He lost $2 billion anyway.

Because a crowd in full euphoria can stay irrational a lot longer than you can stay solvent.

That’s why I don’t short.

But it doesn’t mean I stop paying attention.

What Burry Did Last Week

Burry didn’t just stay short last week.

He added.

On Tuesday, he told readers of his Substack that he’d added “in some size” to his short positions in Micron, Palantir, Nebius, and a big semiconductor ETF.

That’s not a man hedging his bets.

That’s a man pressing.

His argument hasn’t changed.

China is building memory capacity at a massive rate.

When that supply comes online, the shortage driving Micron’s record profits goes away.

And in a commodity business, when the shortage goes away, so do the profits.

Like I said Friday, that’s a logical argument. I agree with it.

The Numbers Burry Is Betting Against

Here’s what makes Wednesday so interesting.

Micron told Wall Street to expect about $50 billion in revenue for the quarter.

A year ago, the same quarter brought in about $11 billion.

Read that again.

It also guided to gross margins of around 86%.

For a memory company, that’s unheard of.

Margins like that tell you exactly how tight supply is right now.

And that’s Burry’s whole point.

Margins like that don’t last in a commodity business.

They attract competition. They always have.

Here’s how the memory cycle works, in plain English.

Demand jumps. There aren’t enough chips. Prices soar.

Every producer on earth sees those profits and builds new factories.

Those factories take two or three years to come online.

Then they all come online at once.

Now there are too many chips, and prices collapse.

The hard part isn’t knowing that the cycle turns.

The hard part is knowing when.

What I’ll Be Listening For

I don’t care much about the headline number.

Micron already told everyone what it expects. Wall Street will fixate on whether it beats.

I’ll be listening for something else.

What management says about next quarter — and what it says about pricing.

If they say customers are still fighting over supply into next year, Burry’s timing problem gets worse.

If they start talking about customers pushing back on price, or orders slowing down, that’s the first crack.

That’s what a turn in the memory cycle sounds like at the start.

Not a crash. A change in tone.

I’ve heard it too many times to miss it.

The Rest of the Week

Micron isn’t the only thing on the calendar.

Nike reports on Thursday. That’ll tell us how the American consumer is holding up with mortgage rates over 7% and energy prices where they are.

On Friday, we get the September jobs report.

With the Fed raising rates, a hot number is the last thing the bond market wants to see.

And keep an eye on oil.

Whether or not the U.S. and Iran have a deal to reopen the Strait of Hormuz by the time you read this, it’s the single biggest wildcard for inflation right now.

Commodity vs. Chokepoint

Here’s how I’d think about all of this.

Burry is betting against companies that make something anyone can make.

Memory is a commodity. China is about to prove it.

The money that lasts in a boom like this one doesn’t go to whoever makes the most chips.

It goes to the company everyone has to go through.

The one you can’t replace.

Take NVIDIA. Its next AI superchip — the one after Blackwell — could be even more lucrative than anything it’s sold so far.

And that chip depends on a supplier most investors have never heard of.

I call it NVIDIA’s “secret supplier.”

Jensen Huang has called AI a “$50 trillion opportunity.”

That’s a very different business from making memory chips that China can copy.

I’ve put together a briefing on who this company is and why I think it’s positioned so well.

Watch the briefing here:

Enjoy the rest of your weekend.

I’ll see you tomorrow.

“The Buck Stops Here,”