Hedge funds increase short bets on AI infrastructure stocks
Hedge funds significantly increased their short positions against artificial intelligence infrastructure companies last month, signaling a strategic rotation away from high-flying chipmakers toward equities demonstrating clearer revenue monetisation.
Hedge funds escalated their bets against artificial intelligence infrastructure companies in July, adding to short positions across major semiconductor and cloud computing names. The strategic shift coincided with a severe global sell-off in technology shares driven by investor skepticism over sky-high valuations and the durability of recent revenue growth.
Data platform Hazeltree reported that Super Micro Computer, Coreweave and Nebius Group all saw increased short interest last month. The trio ranked among the ten most shorted equities in July across a network of more than 700 hedge fund clients, building on similar positioning established in June.
This aggressive shorting occurred during a historically brutal month for technology markets. U.S. chip stocks plunged 20 per cent, while South Korea’s tech-heavy Kospi index dropped 22 per cent, marking the steepest monthly declines for both benchmarks since 2008.
Industry leader Nvidia also experienced a notable shift in institutional positioning. Hedge funds reduced their long allocations while simultaneously raising short bets against the chip giant, though the aggregate institutional stance on the stock remained net positive.
According to Hazeltree, the repositioning reflects a nuanced adjustment rather than a wholesale retreat from the artificial intelligence boom. "Wall Street took profits in some of the year's biggest AI infrastructure winners without abandoning the trade altogether, instead redeploying capital into companies that have shown signs of monetisation," the data provider noted.
The firm added that a parallel reduction in risk occurred across leveraged semiconductor wagers. "A similar unwind played out in leveraged semiconductor bets, with investors trimming borrowed risk rather than exiting AI exposure entirely," Hazeltree said.
High levels of short interest can create volatile trading dynamics, particularly when companies deliver strong financial results. Coreweave shares surged in extended trading on Tuesday after the cloud computing provider surpassed second-quarter estimates.
This recent rally underscores the potential for sudden price spikes when short sellers are forced to cover their positions. When a heavily shorted stock climbs rapidly, investors betting against the company must buy back shares to limit their losses, a phenomenon known as a short squeeze.
