It’s a complicated time for financial markets, with both the Dow Jones Industrial Average and the S&P 500 index mostly trending downward. The combination of poor growth readings and recurring inflation is still pulling markets down as this week winds to a close.
Most members of the group of prominent tech stocks known as the Magnificent 7 have lost considerable momentum, casting uncertainty over the U.S. economy.
💰💸 Don’t miss the move: SIGN UP for TheStreet’s FREE Daily newsletter 💰💸
Popular tech stock Palantir Technologies (PLTR) recently dipped on news that the Pentagon is planning on reducing the United States’ federal defense budget. Additionally, the recent artificial intelligence (AI) chip stock selloff sparked by Chinese AI startup DeepSeek may still be making some investors nervous.
Despite these unsettling market conditions, experts remain mostly optimistic about the prominent tech stocks that are often quick to rebound. But recent data shows that short sellers are targeting some of the sector’s biggest names.
Shutterstock
A list of shortside crowdedness shows some surprising names
When a conversation turns to the best stocks to bet against, most investors don’t think of popular tech leaders. After all, companies that lead the high-growth industry have a proven history of rising above market volatility, even in uncertain times.
However, one market research firm recently published a report on the most crowded shorted securities in the large, mid and small-cap ranges for January 2025. Hazeltree's new Shortside Crowdedness Report shows some unexpected names on the list of short-seller favorites.
Related: Analyst who predicted Palantir rally picks best AI software stocks
The company states that each list is “compiled from Hazeltree’s proprietary securities finance platform data, which tracks approximately 15,000 global equities across the Americas, EMEA, and APAC.” This recently updated list included names such as Apple (AAPL) , server technology company Super Micro Computer (SMCI) and business intelligence software producer MicroStrategy (MSTR) .
These names may seem surprising, as Apple is one of the tech sector’s most prominent companies and has enjoyed a year of mostly steady growth, rising 34%. However, MicroStrategy stock has surged by more than 340%, partially due to its high Bitcoin exposure.
And while SMCI stock has been fairly volatile, it has performed extremely well recently, rising 86% since the year began.
Hazeltree's January 2025 Short-Selling Report:
— Simply Frankie (@Simply_Frankie_) February 21, 2025
A Deep Dive
Hazeltree has just released its latest report on short-selling activity, and it’s packed with interesting insights, especially for those keeping an eye on the tech sector. The report tracks around 15,000 global equities… pic.twitter.com/JOhCq0ZolA
“The tech sector continued to ride a wave of investor enthusiasm from December, which included short-sellers who gravitated to large-cap security names such as Apple and Super Micro,” states Tim Smith, Hazeltree’s Managing Director of Data Insights.
None of these tech stocks topped the large cap list, but all three ranked in the top ten most crowded short position rankings. Both Super Micro Computer and MicroStrategy ranked the highest, earning fifth place on the list with crowdedness scores of 96. Apple received a score of 93.
Semiconductor maker Wolfspeed (WOLF) topped the list of most crowded small-cap shorts with a score of 99. This is not surprising, as the stock has fallen 73% over the past year.
- Experts raise grave concerns about Google's AI strategy
- Elon Musk's latest move shocks tech world
- Mark Cuban slams crypto industry leader for 'huge mistake'
According to Hazeltree, “Each score represents securities that are being shorted by the highest percentage of funds in Hazeltree’s community in a pre-defined category. The securities are graded on a scale of 1-99, with 99 representing the security that the highest percentage of funds are shorting.”
If short sellers are targeting these stocks, should you buy or sell?
When short sellers target an industry-leading company like Apple, it may be tempting to shrug it off, given Apple’s status as Magnificent 7 favorite.
But a closer look reveals that the company’s outlook may not actually be so rosy. As investing expert James "Rev Shark" DePorre notes, it has a fairly aggressive valuation, with “a P/E of 35 and single-digit growth.”
Related: Tech stock CEOs have surprising take on upstart AI rival
Marcus Sturdivant Sr, Managing Member/Advisor of The ABC Squared, spoke to TheStreet about the possible logic behind shorting Apple. As he sees it, assumed problems in China may have factored into the decision to bet against Apple. However, he advises investors to proceed with caution.
“To short Apple, you need to be nimble and ready to cover your position,” he states. “Apple has been shorted before, but now may not be the best time. People also flow their investment dollars into companies they feel comfortable in, and Apple has been a global staple for decades.”
He adds that shorting SMCI made more sense months ago, as concerns regarding the company’s bookkeeping and possible illicit activity sent shares into a downward spiral. Short -seller Hindenburg Research flagged these concerns in a report published on August 27, 2024.
While the stock has since rebounded somewhat, short interest in both SMCI and MSTR remains extremely high, accounting for 10% and 18% of each stock’s float, respectively.
Related: Veteran fund manager issues dire S&P 500 warning for 2025
