Nvidia has recently experienced a series of sharp declines in its stock price, leading to a significant profit for short sellers. The data analysis firm Ortex Technologies reported that short sellers earned nearly $5 billion as Nvidia’s shares were sold off for three consecutive sessions. The losses during these sessions on June 20, 21, and 24 amounted to up to 13%, causing a blow of $430 billion in capitalization.
Short selling involves investors borrowing shares to sell at market price and repurchasing them in the future at a lower price for profit. However, if prices rise, they will incur losses, with no limit to the potential losses. On June 24 specifically, Nvidia shares lost 6.6%, resulting in short sellers earning $2.4 billion in profits. This marked the largest profit recorded by Ortex since it started tracking short selling activity in 2019.
Some analysts attribute Nvidia’s sell-off to investors moving away from AI stocks and diversifying into other sectors in the middle of 2024. Bank of America had predicted this development in an assessment on June 19, pointing out that Nvidia’s rapid rise made the stock vulnerable to profit-taking by investors. Nevertheless, in the most recent session, Nvidia saw an increase of 6.7%, showing that optimists still believe in the company’s role in the global AI industry.
Nvidia has been on a significant upward trajectory since the beginning of the year, recording a 145% increase and ranking as the second-best performing stock in the S&P 500 index. The company’s revenue has soared over the past year, with major technology giants like Google, Microsoft, Meta, Amazon, and OpenAI purchasing billions of dollars worth of graphics chips. In the first quarter, Nvidia reported record revenue of $26.04 billion and net profit of $14.8 billion