Who are Wall Street's short sellers targeting? Goldman Sachs reveals the hidden shorting thread beneath the AI wave
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Who are Wall Street's short sellers targeting? Goldman Sachs reveals the hidden shorting thread beneath the AI wave
Data shows that U.S. stock short-selling levels have risen to a five-year high, but investors are not directly challenging AI giants; instead, they are targeting "pseudo-beneficiaries" that have been lifted by the AI hype despite lacking core competitiveness.
Navigating Web3 tides with focused insightsSource: Jinshi Data
Current sentiment in the U.S. stock market appears slightly tense, with Oracle's credit default swap (CDS) trading volume surging and even AI industry insiders acknowledging signs of a "bubble." Against this backdrop, discussions about when, where, and how to short the market are growing.
Goldman Sachs' latest hedge fund positioning report contains many interesting details. It shows that so-called "smart money" is not yet ready to launch large-scale short positions against AI giants, although some funds have begun focusing on weaker companies riding this wave.
First, despite such a strong rally previously, the median short interest among S&P 500 components remains surprisingly high. At 2.4% of total market capitalization, it sits at the 99th percentile of short levels over the past five years and far exceeds the long-term average since 1995.
Signs of renewed shorting interest emerged as early as May, and short interest has continued rising since then, remaining elevated even after two small but painful "short squeezes" in July and mid-October.
It’s also worth noting that short interest in the tech-heavy Nasdaq 100 Index is slightly higher at 2.5%. The sector seeing the largest increase in shorting is small caps, where the median short interest among Russell 2000 constituents now stands at 5.5%.
However, Goldman notes in its report that the most striking development is the surge in short interest in the utilities sector, which jumped 0.3 percentage points to 3.2%. This may not sound dramatic, but Goldman says it’s one of the highest levels ever recorded.
This is likely tied to the AI bubble. After all, data centers powering AI models consume massive amounts of energy, making once-"boring" utility stocks newly attractive.
For example, American Electric Power has seen its share price rise over 31% this year, reaching a market cap of $65 billion. Last month, it raised its five-year capital expenditure plan from an already substantial $54 billion to $72 billion, primarily to power data centers built for companies like Alphabet, Amazon, and Meta.
According to Koyfin data, its current short interest stands at 4%, compared to a typical range of 1% to 2% over the past decade.
Are individual utility companies the most popular short targets in Goldman's data? The report indicates otherwise, as their overall short levels remain relatively moderate compared to other sectors (after all, they’re still utilities).
Tesla remains the most heavily shorted company in the U.S., while JPMorgan Chase has entered the list at fourth place in a rather "peculiar" manner. Among the new names heavily shorted according to Goldman, many can be categorized as "weak AI companies" or "AI-related bubble stocks." Yet the top ten most shorted stocks still look quite familiar:
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Tesla (TSLA.O)
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Palantir (PLTR.O)
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Palo Alto Networks (PANW.O)
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JPMorgan Chase (JPM.N)
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Robinhood Markets (HOOD.O)
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Costco (COST.O)
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Bank of America (BAC.N)
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IBM (IBM.N)
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Oracle (ORCL.O)
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Lam Research (LRCX.O)
Goldman's data shows short positions of $5.4 billion in Oracle, $4.6 billion in Intel, and $4.1 billion in GE Vernova (which manufactures gas turbines for AI data centers)—all newly added to the list.
Of course, these companies are large, so relative to their market caps, these short positions remain small (approximately 1%, 3%, and 3% respectively). Which stocks are the most heavily shorted relative to size? Goldman also provides the answer:
In contrast, among companies with market caps of at least $25 billion, the most heavily shorted stock in the U.S. relative to its size is Bloom Energy. Other names on the list include Strategy, CoreWeave, Coinbase, Live Nation, Robinhood, and Apollo.
It’s important to remember that Goldman Sachs’ hedge fund positioning report is a delayed snapshot of current market conditions. Nonetheless, it holds considerable value, as it is based on the latest holdings data from 982 hedge funds managing a total of $4 trillion in equity positions—$2.6 trillion long and $1.4 trillion short.
For now, the U.S. stock market has recovered from last week’s volatility, and many hedge funds remain cautious toward AI giants, as bubbles often last longer than a fund’s solvency. Indeed, Amazon, Microsoft, Meta, Nvidia, and Alphabet remain the five most commonly held long positions among U.S. hedge funds.
Still, rising short interest in the utilities sector and certain weak AI stocks suggests that some capital is beginning to position itself around what could be a potential area for the next major short trade.
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