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NVIDIA Short Interest Plummets As (Short) Investors Jump Ship


NVIDIA Short Interest Plummets As (Short) Investors Jump Ship

Something very interesting has been happening to NVIDIA Corporation’s stock lately – it has been going through what can only be described as a completely natural short squeeze and the end result is that the short interest in NVIDIA stock has been plummeting sharply.

This does not mean that all investors now see it from a bullish point of view; rather that many short investors have taken as much loss as they can stomach and have started to cash out.

Declining short interest on NVIDIA stock could lead to another price hike and increased implied vol


Theoretically, this would mean that the stock will be free to soar even higher as some of its short interest dead weight gets lost. Most of the investors who were short NVDA were hoping for a major correction to reverse the recent bull run back to sub $100 levels.

A market correction did happen due to profit taking, but it was nothing more than a few dollars wide and barely corrected the last leg of the run to $106 levels.

NVIDIA Corp. has increased by more than 224% during the last year to become one of the hottest stocks on S&P. It also had the highest short interest among S&P 500 and there was about $1.5 billion of short interest at the start of last year, and it climbed steadily to $7.1 billion in mid-December stocks.

There are two reasons for this, the textbook answer is that such a drastic change in price is usually immediately corrected by the first sell off of investors who bought in before the bull run and want to lock in profits.

The second reason for this is that a lot of the investors must have genuinely believed this stock to be overpriced (as we have been saying for well over a year now though, it was underpriced prior to the hike of 2016.).

In 2016, NVIDIA had the highest short interest among S&P 500 stocks with market caps of over $50bn according to Bespoke Investment Group.

A rough estimate puts the losses for short sellers at about $4.4 billion last year, according to S3 Partners, a financial analytics firm. The shorts made back about $131 million last week, with the stock falling 4.7% in the first three days of the year. Source: WSJ

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