Hedge funds are increasingly betting against major tech stocks, with Nvidia (NVDA), Tesla (TSLA), and Advanced Micro Devices (AMD) emerging as their top short targets, according to a report by Reuters citing a Morgan Stanley note released on Thursday.
The investment bank’s institutional equity division reported that Wednesday marked the third-largest day of single-stock selling by hedge funds this year, with the technology sector leading the sell-off.
According to Morgan Stanley, hedge funds predominantly increased short positions in their portfolios while making only slight reductions to long exposures. This shift highlights growing concerns about the stock market’s outlook, following two consecutive years of 20%-plus gains in the S&P 500. The index is down 2.6% year-to-date, reflecting investor anxiety over US trade policy and broader economic headwinds.
The targeted short positions in Nvidia, Tesla, and AMD suggest that hedge funds see select members of the once high-flying “Magnificent Seven” as overvalued.
Except for Meta Platforms (META), most of the Magnificent Seven stocks have underperformed the S&P 500 in 2024. Tesla has fallen more than 31%, while Nvidia is down over 16%. AMD, though not part of the Magnificent Seven, has declined more than 12% this year.
Despite the bearish sentiment, hedge funds closed out short positions in Apple (AAPL) and Alphabet (GOOGL) on Wednesday, suggesting a selective approach to their short-selling strategies.
Data from analytics firm Ortex shows that short interest in the Magnificent Seven stocks has been increasing, though it remains below early-year levels. On Tuesday, short interest in the group rose by 8% to 1.19%, before slightly retreating the next day.
Tesla has been a major target for short sellers, with short interest climbing close to 3%. The company’s shrinking market share in Europe, as reported by the European Automobile Manufacturers Association (ACEA), has added to bearish pressure. Still, Tesla’s stock gained 3.45% on Tuesday, despite the data.
