Three sharp declines after a record-breaking rally have made Nvidia shares a bargain for short sellers.
Data analysis firm Ortex Technologies said short sellers profited nearly $5 billion when chip company Nvidia ‘s shares were sold off for three consecutive sessions. During the sessions of June 20, 21 and 24, this code lost up to 13%, blowing away 430 billion USD in capitalization. This happened right after Nvidia surpassed Microsoft and Apple to become the most valuable company in the world last week.
On June 24 alone, when Nvidia shares lost 6.6%, short sellers earned $2.4 billion. This is the largest profit Ortex has recorded since it began tracking short selling activity in 2019.
Short selling means an investor borrows shares to sell at market price, then buys them back in the future to repay them. Therefore, if the price goes down, they will be able to buy it back at a cheaper price and make a profit. But if prices increase, they will lose money. And this number of losses is unlimited.
Some analysts believe Nvidia’s sell-off is due to investors moving away from hot AI stocks and into other sectors, with 2024 already halfway through.
Some analysts have predicted this development. In a June 19 review, Bank of America said that “Nvidia’s steep rise leaves the stock vulnerable to profit-taking.”
Still, the stock rebounded yesterday, up 6.7%. Optimists remain bullish on Nvidia’s central role in the global AI wave. The stock has gained 145% this year, making it the second-best performer in the S&P 500.
Nvidia’s revenue has skyrocketed over the past year as tech giants like Google, Microsoft, Meta, Amazon, and OpenAI have bought billions of dollars worth of graphics chips. In the first quarter, Nvidia reported record revenue of $26.04 billion and net income of $14.8 billion. The company expects revenue this quarter to reach $28 billion.
