• Total US short interest exceeded $1 trillion as of last Friday, S3 Partners data shows.

  • The top five shorts are mega-cap tech stocks Tesla, Apple, Microsoft, Nvidia and Amazon.

  • That comes after big stock market gains so far this year.

US short interest this month rose to the highest level since April 2022, as investors bet that the current bull run in stock market is set to falter.

According to data from S3 Partners, the amount spent by short sellers against US stocks hit $1.02 trillion, as of Friday. Those bets came even as the continued to rally earlier this month, costing short sellers $101 billion.

S3 data shows that the top shorts are Tesla, Apple, Microsoft, Nvidia, and Amazon. As of Friday, their collective short interest topped $83 billion.

The bearish sentiment results from skepticism on how much higher stocks can go. So far this year, the S&P 500 is up 13.5%, and the Nasdaq is up 29%.

But since the Federal Reserve last week indicated more rate hikes are on the table this year, stocks have been on a losing streak.

This year, Wall Street has been caught up in hype over artificial intelligence companies, which saw their valuations skyrocket and have brought more investors into the market due to “fear of missing out.”

But big names have voiced divided outlooks on the AI frenzy. For instance, while Stanley Druckenmiller sees Nvidia as a stock worth holding for the next couple of years, short seller Jim Chanos has demonstrated skepticism towards the stock.

Meanwhile, the prospect on continued hawkishness from the Fed has added to macroeconomic risks. A recent Goldman Sachs report put the odds of a recession in the next 12 months at 25%, and warned a downturn could cause a 23% decline in the S&P 500.

Still, if bullish investors win out, short positions could eventually support market gains, as a short squeeze forces more buying and boosts stocks.

Written by:  @Business Insider

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