Nvidia’s Stock Surge Inflicts $3 Billion Loss on Short Sellers

Nvidia Stock

The substantial surge in Nvidia Corp.’s (NASDAQ:NVDA) shares on Thursday has resulted in approximately $3 billion in paper losses for short sellers, according to an analysis conducted by S3 Partners LLC, describing the situation as an “AI-generated nightmare” for bearish traders.

These mark-to-market losses serve as yet another setback for contrarian investors who had been voicing concerns about Nvidia’s lofty valuations and speculative fervor, warning of a potential market bubble waiting to burst. As per S3 data, the chipmaker ranks as the third-largest US short, with $18.3 billion worth of shares borrowed and sold.

Ihor Dusaniwsky, managing director of predictive analytics at S3, noted, “The early mark-to-market losses were inescapable for many short sellers that were looking to trim their positions after NVDA’s earnings report.” He added, “Short sellers will probably wait a bit to look for more favorable exit points.”

The rally in Nvidia’s stock catalyzed broader gains across the US chip industry, with short sellers facing a one-day paper loss of $4.3 billion from semiconductor stocks, according to S3 data. Semiconductors stand out as the worst-performing sector for short sellers this year, with mark-to-market losses amounting to $7.2 billion in February alone.

Nvidia’s shares continued their ascent on Friday, surging as much as 4.9% in early trading in New York.

Some investors argue that Nvidia’s stellar earnings report will reinforce optimism surrounding robust AI spending, thereby justifying the significant gains witnessed in the stock market.

With Nvidia’s impressive 16% surge on Thursday, the company now ranks as the third-largest S&P 500 company, positioning it on course to breach $2 trillion in market value. The Philadelphia Semiconductor Index recorded an approximate 65% climb in 2023 and has already seen a further 13% increase this year.

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