Short sellers are building record bearish positions across US equities despite a powerful stock market rally, as concerns over the durability of artificial intelligence investment and growing competition from China fuel scepticism among investors, according to a report by Bloomberg.
Short interest in S&P 500 constituents has risen to within reach of 3.79% of free float, the highest level in data going back to 2010, according to S3 Partners. Across the broader Russell 3000, short interest has reached 6.3% of shares available for trading — also a record.
The increase comes despite shorting proving a difficult strategy for much of 2026. The S&P 500 has climbed 18% since late March, although the index fell 1.6% last week as investors reassessed the scale of spending on AI infrastructure and the threat posed by Chinese competition.
The rise in bearish positioning marks a notable shift after almost four years of gains in US equities forced many short sellers to hedge their views with long exposure. Investors still have roughly twice as much capital deployed in long positions as in short bets, according to data from S3 Partners, but the growing scale of short interest highlights increasing concerns about stretched valuations and the sustainability of the rally.
Short interest in NYSE-listed companies has been climbing since February and reached 9% of shares outstanding in late June, according to data compiled by Reynolds Strategy. That compares with roughly 5% during the global financial crisis and around 6% during the Covid-19 market shock.
Hedge funds, however, have recently begun reducing some bearish exposure. Goldman Sachs data show that funds covered short positions in individual US stocks at the fastest pace in three months.
The performance of heavily shorted stocks has nevertheless provided some support for the bears. The most-shorted names in the Russell 3000 have fallen an average 15% this year, compared with a gain of almost 21% for the rest of the index, according to Bespoke Investment Group. The Russell 3000 itself is up 9.3% in 2026.
Some individual shorts have been particularly profitable. Shares in Hertz Global Holdings have plunged 65% this year, while short interest represents roughly 79% of the company’s free float.
The same scepticism is evident among the market’s largest companies. Despite the S&P 500’s 9.3% gain this year, some of the biggest dollar-value short positions are concentrated in the so-called Magnificent Seven technology companies and chipmakers including Micron Technology and Broadcom, according to S3 Partners.
SpaceX is among the notable examples where short sellers have benefited from a sharp decline. Before Friday’s selloff, the company ranked among the most heavily shorted stocks in the US, with approximately $25bn of short positions representing nearly 29% of its float. Those positions were showing mark-to-market gains of almost $4.8bn, or 28%, for the year, according to S3 data.
