The AI bubble theory resurfaces, short sellers earn $5.6 billion in two days!
Concerns about an investment bubble in artificial intelligence have intensified, leading to a two-day decline in technology stocks. Investors shorting AI-related stocks have made substantial profits during this pullback, earning $5.6 billion in just two days. The stock prices of tech giants such as Meta and NVIDIA, as well as pure AI companies like CoreWeave, have seen significant declines
As concerns grow over the sustainability of the artificial intelligence investment boom, the theory of an AI bubble has resurfaced, leading to a two-day decline in tech stocks.
On Wednesday, tech stocks fell for the second consecutive trading day, with the tech-heavy Nasdaq Composite Index dropping 0.7%, leading the major indices. The day before, the index had already fallen by 1.5%. Market doubts about whether the AI boom can continue are escalating.
According to data analytics firm S3 Partners, investors shorting AI-related stocks have profited significantly during this market pullback. Over the past two trading days, short positions on a basket of AI concept stocks have generated up to $5.6 billion in realized and unrealized profits for investors.
Behind this round of sell-off are warnings from industry leaders and a research report. According to a report by The Verge last Friday, OpenAI CEO Sam Altman stated that while AI is “the most important thing for a long time,” the technology may be in a bubble similar to the internet bubble of the early 2000s. Additionally, media reported on Monday that researchers from MIT's Project NANDA released a report stating that 95% of the companies studied have not seen any returns from AI.
Tech Giants Under Pressure, Short Sellers Profit $2.8 Billion
Among the companies known as the "Seven Tech Giants," Meta has been hit the hardest, with its stock price dropping 4% over the past five trading days. During the same period, chip giant NVIDIA's stock price fell by 3.8%.
Other tech giants have not been spared either. Microsoft and Apple's stock prices both fell nearly 3%, while Google's stock price dropped by 1%. Data shows that in the past two days, short bets against these five companies alone have generated over $2.8 billion in profits for investors.
Beyond the large tech companies, some AI-related companies have seen even steeper declines. Chipmaker AMD's stock price has dropped over 10% in the past five trading days. During the same period, Broadcom and Micron's stock prices also fell by more than 5%.
As a company that rents computing power to firms like Microsoft and Meta, CoreWeave is seen as a "pure play" in the AI sector, and its stock price has plummeted by 21% over the past five trading days, reflecting the concentrated impact of the market sentiment reversal on the sector.
Meta at the Center of Attention, Short Sellers Make Big Bets
As a focal point of the current downturn, Meta has been increasing its investment in the AI field, spending billions of dollars on acquisitions in just the past few months and offering nine-figure salaries to researchers at its Meta Super Intelligence Lab.
However, reports indicate that the parent company of Facebook and Instagram is seeking to downsize its AI department. Against this backdrop, investors have poured $4.7 billion into short positions on Meta over the past week. These bets have yielded over $1.1 billion in profits for investors in the last two days.
Intelligence technology provider Palantir has been one of the biggest losers in the market rotation over the past few days. Palantir's stock price had surged over 150% since its low in April, but the stock has now fallen for five consecutive trading days, marking its longest losing streak since March, with a cumulative decline of over 15%. According to S3 Partners, investors who shorted the stock have made over $1 billion in profits from their positions in the past two days.
