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- Short sellers suffered losses of more than $170 billion betting against US stocks this year.
- US equities surged throughout 2023 as investor frenzy over artificial intelligence powers a rally.
- S3 Partners data reveals Nvidia, and Meta have been among the most unprofitable shorts this year.
Short sellers have lost more than $175 billion betting against US stocks after investor mania for AI fueled an unexpected tech rally.
The surge in tech stocks led to $175.2 billion in mark-to-market losses for short sellers year-to-date, with $53.5 billion of it stemming for July alone.
According to data from S3 Partners, only 30% of every shorted stock was a profitable trade for investors this year.
"US/Canada equity short sellers started out 2023 with large mark-to-market losses in January, followed by four months of profits, and now a second month of large losses," S3 Partners said in a research note.
Short selling, also known as shorting, refers to investors borrowing stock to sell with the goal of buying it back later at a lower price and returning it to the lender, pocketing a profit. Traders engage in short selling when they expect a company's stock price to decline, and want to make money if that happens.
But 2023 has proven the bears wrong.
Investors have piled into tech stocks through 2023 thanks to the release of OpenAI's ChatGPT in November, and optimism that the Federal Reserve will ease up on its monetary policy. Both sentiments have helped the S&P 500 and Nasdaq 100 surge about 17% and 39% this year respectively.
Short interest in stocks including Nvidia, Meta, and Tesla have proved to be the least profitable shorts for traders, S3 Partners reveals. The three companies have ballooned in value so far this year, with Nvidia emerging as an investor favorite.