This week, short interest among U.S. investors has reached impressive levels. Even as regulations consider a ban on short selling, investors aren’t shying away from betting against a wide variety of stocks. Many of the market’s most shorted companies right now fall into the category of unstable meme stocks, such as Carvana (NYSE:CVNA) and Beyond Meat (NASDAQ:BYND). However, it isn’t only the unstable companies with a significant retail investor following that are garnering a high short interest. In fact, some very prominent tech stocks are being heavily shorted despite the indicators that the U.S. economy is entering a new bull market.
What are these leading tech companies? Tesla (NASDAQ:TSLA), Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Nvidia (NASDAQ:NVDA), and Amazon (NASDAQ:AMZN). According to data from market research firm S3 Partners, their collective short interest recently exceeded $83 billion.
Does this mean that everyone should be betting against these tech giants? Let’s take a closer look.
Surging Short Interest Among Tech Stocks
When it comes to stocks to short, these tech stocks likely aren’t the first names that come to mind. After all, they have all experienced impressive years marked by notable growth. The artificial intelligence (AI) boom has created ample opportunity for all five to grow even more. In fact, it took Nvidia to a trillion-dollar market cap and has Apple poised to reach $3 trillion.
On the surface, the macroeconomic outlook may look pretty right now. However, this doesn’t mean there isn’t still plenty of risk. Goldman Sachs recently warned investors to “consider downside protection” as due to the continuous threat of a recession. Were that scenario to play out, it could cancel out the growth that the S&P 500 index has seen recently, a significant part of what has fueled the recent tech stocks rally.
It is also worth noting that short sellers will likely always target a company like Tesla. Despite its dominance in the electric vehicle (EV) market, Elon Musk’s questionable leadership has raised many red flags. It’s easy for investors to be taken in by the hype during a market rally. That said, the high short interest in leading tech stocks should serve as a reminder that market forces can quickly shift, even in times of optimism.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
