Short sellers have been profiting at the start of 2025 due to a significant drop in the stock prices of some of the most popular companies in the market over the past two years. Data from S3 Partners reveals that short sellers have collectively earned $15 billion by betting against Nvidia and Tesla stocks this year. Specifically, Tesla short positions have made almost $11 billion, while Nvidia shorts have generated over $4 billion.
Tesla's 40% decrease this year has been one of the major contributors to the "Magnificent Seven" decline. Concerns have risen among investors regarding CEO Elon Musk's involvement in government efficiency initiatives and how this may impact the electric vehicle company's customer base.
Apart from Tesla, the "Magnificent Seven" index – consisting of Apple, Alphabet, Microsoft, Amazon, and Meta – has been underperforming the S&P 500 this quarter by the largest margin since 2022. Short sellers have profited from all these companies within the cohort this year, with nearly $5 billion in earnings from betting against Apple, which has seen a nearly 14% decline in 2025.
A crash in the popular trade of the past two years has occurred as investors reassess their growth expectations amidst concerns about slowing economic growth and the influence of Trump's tariff policies on the markets. Additionally, Big Tech companies face heightened criticism from investors regarding their increasing AI expenditures and whether these will lead to the desired future profits. The market also experienced a significant drop in several large tech companies, including Nvidia, following the introduction of a more affordable AI model by Chinese firm DeepSeek.
Now, with most of these companies trading around 20% below their recent highs, the question looming over the market is whether investor interest in the stocks that drove the market's growth over the past two years will rebound.
BMO Capital Markets' chief investment strategist Brian Belski suggested that while these tech companies may have overreached, they remain critical in defining the growth trajectory of the US stock market and will likely persist.
Tesla shorts have earned nearly $11 billion due to the stock's decline amid concerns about Elon Musk's ties to the Trump administration, which could deter potential buyers.