Funds Short Utilities & Weak AI Stocks Amid AI Bubble
Goldman Sachs reports that US equity short interest has reached a five-year high, as hedge funds shift their short selling focus from AI giants to “pseudo-beneficiaries”—companies inflated by the AI bubble but lacking core competitiveness. The S&P 500’s median short ratio stands at 2.4% (99th percentile), while the Nasdaq 100 and Russell 2000 measure 2.5% and 5.5% respectively. Notably, the utilities sector’s short ratio climbs to a record 3.2%, driven by concerns over energy-intensive data centers. American Electric Power now faces 4% short interest after its 31% stock rally and a $72 billion capex boost for data-center power supply. Top individual short positions include TSLA, PLTR, PANW, JPM, HOOD, and IBM, with Oracle, Intel, and GE Vernova newly notable. On a relative basis, Bloom Energy, CoreWeave, Coinbase, Live Nation, Robinhood, and Apollo lead short interest among large-cap firms. Despite rising bubble-driven short selling, hedge funds maintain long bets on AI leaders—Amazon, Microsoft, Meta, Nvidia, and Alphabet—suggesting cautious positioning ahead of potential market volatility.
Neutral
The Goldman Sachs report highlights a surge in short selling across sectors inflated by the AI bubble—particularly utilities and weaker AI-exposed stocks—while hedge funds maintain long positions in major AI leaders. This cautious repositioning may increase equity market volatility but carries limited direct impact on cryptocurrency trading. Historically, rising short interest in equities can spur risk-off sentiment across asset classes, yet sustained long bets on tech giants mitigate immediate contagion. Crypto markets are likely to remain driven by on-chain factors and regulatory news rather than equity short-selling dynamics, making this development neutral for cryptocurrency traders in both the short and long term.