- Short interest in US stocks is at a record.
- Data from S3 Partners says short interest across all index stocks is around 3.7% of free float.
- Global investors are worried about chip stocks and an AI bubble, a BofA survey found.
The financial data firm says its measure of short interest in US stocks has hit record levels. While shorting is a natural hedging strategy among bullish investors, increased bets on a decline in US stocks aligns with concerns about high valuations and cracks in the AI narrative as investors questions the economics of colossal capex
Short interest in all Samp;P 500 stocks is about 3.7% of the index’s free float, according to data S3 aggregated from hedge funds, asset managers, and financial firms. That reflects the highest volume of short interest the index has seen since S3 began tracking the data in 2010
Prior to 2010, short interest in the median S&P 500 stock peaked at around 3.8% of the index’s market cap in 2008, during the Great Financial Crisis, according to an analysis from Goldman Sachs
The surge in short interest this year comes at an important juncture in the nearly four-year-old bull market, with the major indexes still hovering near record highs even as doubts about the AI bull case percolate in the market
Memory and semiconductor stocks, two of the market’s hottest trades this year amid the AI frenzy, stumbled into a bear market this month. At the same time, investors have also been cautious on the AI as they spend hundreds of billions on the technology without a clear path to monetization
Broader macro concerns are also casting a shadow over the rest of the market. Tensions remain high between the , and questions linger about the path of inflation this year. A reprieve in June CPI data could prove temporary if the war reignites, which could push the Federal Reserve to raise interest rates this year
Institutional investors grew more bullish overall in the last month, but are growing increasingly wary of the semiconductor trade. 82% of surveyed fund managers in July said they believe global chip stocks are the most crowded trade in financial markets
Almost half of fund managers surveyed also said they believe the is the market’s biggest tail risk, up from 28% of investors who thought so the prior month
Yet, investors also increased their allocation to stocks, with positioning in US equities rising to its highest level since December 2024, the bank wrote in a recent note