Has the culprit behind the market crash been found? "The Big Short" prototype speaks out, AI stocks plunge together, and the "Burry Effect" sweeps Wall Street

One remark from Buffett is enough to move the market, a phenomenon dubbed the "Buffett Effect." Today, as The Big Short's real-life inspiration Michael Burry starts to disclose his trades in near real time, Wall Street is beginning to discuss a new question: does a so-called "Burry Effect" exist?

Burry himself does not agree. In an email to Business Insider, he stated: "I don’t think there is a Burry effect."

But market performance suggests that this investor, known for betting on the collapse of the US real estate bubble, may be underestimating his own influence.

Burry Discloses Trades in Real Time, Is the Market Following?

Burry currently ranks second on Substack’s bestseller list under finance, and has nearly two million followers on the X platform. This kind of following ensures his public trading actions quickly come into the market’s view.

This week, the "Burry Effect" seems to have already manifested. On Thursday (July 2), Burry wrote on Substack that the day before, he had shorted Micron. In Tuesday's article, he also unveiled new bearish bets targeting Nvidia, Applied Materials, Caterpillar, Tesla, and the iShares Semiconductor ETF (SOXX) tracking semiconductor stocks.

In a previous article, Burry called SOXX “the purest form of overvaluation.”

He also commented that large-scale investment plans announced by Samsung Electronics and SK Hynix have pushed up chip equipment stocks, but in his view, this signals “the beginning of the end.”

AI Hardware Stocks Plunge Collectively for Two Days

After Burry disclosed his bearish stance, relevant AI hardware and semiconductor stocks were quickly sold off.

In the Korean market, Samsung Electronics fell a cumulative 14% across Wednesday and Thursday, while SK Hynix plunged 17% in two days.

In US markets, SOXX dropped 12% in two trading sessions; Applied Materials sank 17%; Micron fell 15%; and Nvidia also pulled back nearly 3%.

Other stocks in Burry’s short list also came under pressure. Caterpillar fell 11% in two days. Although Tesla announced a sharp quarterly increase in vehicle deliveries on Thursday, its stock still slipped 6%.

The drop in Caterpillar has attracted particular attention. Driven by increased demand for power equipment due to AI data center construction, the stock has climbed about 68% year-to-date. Burry shorting Caterpillar is seen as yet another signal of his bearish view on the AI capital expenditure supply chain.

Is the “Burry Effect” the Inverse of the “Buffett Effect”?

Wealth Club chief investment strategist Susannah Streeter said it is fair to say there is indeed a short-lived “Burry Effect.”

She pointed out, “Investors know he has a record of spotting excessive booms, even though his timing is often early. So when he targets market segments with high valuations, it may trigger investors to sell and lock in gains—something that appears to have occurred this week to some extent.”

Streeter believes this is almost a mirror image of the “Buffett Effect.”

She said, "Buffett’s investments inspire confidence and draw in buying. In contrast, Burry’s bearish disclosures might encourage investors to take profits and reduce risk exposure. However, Burry’s remarks tend to amplify existing market unease, rather than create these worries out of thin air."

Saxo UK investment strategist Neil Wilson also said Burry’s short on Caterpillar was an unexpected move that “will definitely have an impact,” potentially amplifying investor concerns about the stock's lofty valuation.

He believes Burry’s warnings are becoming part of the narrative opposing the sustainability of high-growth stock profit stories.

From Palantir to Micron, Burry Continues to Target AI Trades

Palantir is a case in point. After Burry revealed a short position on Palantir in November last year, he faced a fierce rebuttal from CEO Alex Karp. In May this year, Burry said he had “directly shorted” the stock, and on June 25 wrote that he had halved the position the previous week.

AJ Bell investment director Russ Mould noted that Burry drew criticism for shorting Palantir, but the AI and data analytics software stock is now nearly 40% below its November high.

Mould believes Burry’s short bets indicate his expectation that AI investment will slow as returns disappoint, leading to inventory surpluses and increased idle capacity. This would affect the whole supply chain from servers, chips, and cooling systems, to engineering machinery and more.

He said Burry’s history shows he’s not afraid to enter early and endure pressure, but hot money and passive fund flows may test his conviction in the short run.

AI Rally Enters the "Belief Test" Phase

It is still hard to say whether Burry will ultimately be proven right. But one thing is certain: his public disclosures have already become an important sentiment variable in AI trading.

Over the past two years, the AI narrative has powered sharp gains for stocks in chips, memory, power equipment, data center infrastructure, and some software. But as valuations expand, capex balloons, and the market begins to doubt the pace of returns, investor tolerance for AI trades is waning.

In this context, Burry’s bearish comments may not be the sole reason for selloffs, but could be a catalyst for profit-taking.

If Burry's bets succeed, the "Burry Effect" could grow stronger. For Wall Street, this means AI trades now require tracking not just Nvidia's earnings and tech giants’ capex, but also whether a “contrarian indicator” figure is openly betting on the bubble bursting.