Shorts get squeezed early on their tech trades
Short sellers have been getting more aggressive, but they also seem ready to bail out of trades quickly.
Top tech targets of short sellers rose sharply in early trading on Tuesday in a seemingly squeezey start to holiday-shortened trading week.
Goldman Sachs’ themed “Info Tech Most Short” basket — made up of 20 tech companies in the Russell 3000 with the highest short interest as a share of float — rose more than 2.5% in the first hour of trading.
It includes several names with massive retail interest, nosebleed valuations, and piddling profits that have attracted the attention of stock market sharks known as “the shorts.”
Those include voice AI software outfit SoundHound AI, quantum computing firms Rigetti Computing and D-Wave Quantum, and bitcoin buyer MARA Holdings.
In a research report published last week, Goldman analysts noted that hedge funds are now bolder about their short positions than they’ve been since retail traders flocked to GameStop in 2021, which dealt a blow to some sophisticated hedge funds that were shorting the stock:
“Funds increased shorts in both ETFs ($218 billion at the start of 2Q) and single stocks ($948 billion). For the first time since the 2021 short squeeze, short interest in the median S&P 500 stock ranks above the long-term historical average, rising to 2.3% of float from 1.8% in December 2024.”
But the sharp moves in the shares of heavily shorted stocks this morning — to exit trades, short sellers must buy the stock, and when many do it at once it can generate an exaggerated pop in the price — suggests some short sellers remain attuned to risks of betting against stocks with heavy interest from retail traders, and are willing to bail out fast if they see things going against them.
