AI stock hype cools as short sellers gain

Short sellers profited as AI stocks pull back, adding weight to questions about AI ROI and the sustainability of AI stock rallies.

Short Sellers Cash In as AI Stocks Pull Back

Short sellers earned about 5.6 billion dollars in two trading days by betting against AI related stocks, according to S3 Partners. OpenAI CEO Sam Altman compared the current AI excitement to the dot-com bubble, signaling concerns that the rally may not be sustainable. MIT’s Project NANDA reported that 95 percent of companies using AI have not yet shown a return on their investment. The Magnificent Seven broadly declined, with Meta Platforms, Nvidia, Microsoft, Apple, and Alphabet all slipping, while smaller AI focused firms and chipmakers fell harder. CoreWeave dropped 24 percent, Palantir Technologies slid over 15 percent, and short sellers contributed to more than 2.8 billion dollars in gains from these giants last week, including about 1.1 billion from Meta alone.

The data lays bare a tension in markets: a high conviction story about AI meets a cautious reality about returns. The surge in short selling shows traders betting on downside, which can widen price swings and attract more downside risk for late buyers. Yet the tech backbone of AI remains; the question is whether progress will translate into durable profits for companies that deploy the technology, not just hype. As investors reassess risk, the case for AI is likely to hinge on real-world ROI and tangible improvements in productivity, not room on a chart for speculative hopes.

Highlights

Markets will test AI promises against actual business results and real-world gains.