Chip stocks’ recent stumbles have given short sellers, who have spent much of the past year at the mercy of an artificial intelligence-driven bull market, reason to hang on to their bearish bets. Despite a pullback across semiconductor stocks in recent trading, traders betting on some of the industry’s biggest companies are showing little sign of backing down. Instead, short interest in stocks like Micron and Qualcomm remains near multi-year highs, suggesting that some investors see the downturn as the beginning of a more meaningful crack in one of Wall Street’s hottest trades. This positioning is especially notable with investors now heading for Nvidia’s earnings after Wednesday’s bell. This report has repeatedly served as a catalyst for driving the broader AI ecosystem market. Bears are holding their positions despite the risk that Nvidia’s new positive outlook could reignite momentum across semiconductor stocks. Qualcomm has become one of the most frequently shortened names in the space. Short interest recently reached about $11.8 billion in nominal terms, the highest level in at least a decade, according to data from S3 Partners. The last big buildup occurred in 2018, when bearish bets neared $10 billion as investors pivoted to the company’s ultimately abandoned acquisition of NXP Semiconductors. Short sellers have largely held their ground even after the recent decline in stock prices. Qualcomm’s short positions peaked in nominal terms on May 12, according to S3 data, and since then the number of shares short has increased slightly while the stock price has fallen. QCOM YTD Mountain Qualcomm’s year-to-date Micron shows a similar pattern. Short interest remains just below 52-week highs, while bearish positions in Nvidia and Intel also remain elevated compared to the start of the year, although they have eased from their recent peaks. “There was no capitulation on the short side,” said Ihor Dusaniowski, managing director of predictive analytics at S3 Partners. “The speed of this movement is very fast. They’ve lost a lot of money, so they want to see how much money they can get back if the stock price declines.”The reluctance to report suggests that some investors are increasingly doubting whether valuations in sectors of the semiconductor industry can continue to rise after years of gains from AI. Semiconductor stocks have been the biggest driver of the market rally, helping major indexes repeatedly break records as investors pour money into companies expected to benefit from increased spending on AI infrastructure. Still, betting against groups often proved painful. Short sellers have been repeatedly forced to unwind their positions as demand for AI-related hardware continues to exceed expectations and major chip makers have delivered better-than-expected results. The PHLX Semiconductor Index is up more than 65% year-to-date after posting its first weekly decline in seven weeks.
