Chip stocks' recent stumble is giving short sellers a reason to stick with bearish wagers after spending much of the past year getting steamrolled by the artificial intelligence-fueled rally. Despite a pullback across semiconductor shares in recent sessions, traders betting against some of the industry's biggest names have shown little sign of retreating. Instead, short interest in stocks including Micron and Qualcomm remains near multiyear highs, suggesting some investors see the latest weakness as the beginning of a more meaningful crack in one of Wall Street's hottest trades. The positioning is especially notable with investors now heading into earnings from Nvidia on Wednesday after the bell — a report that has repeatedly acted as a market-moving catalyst for the broader AI ecosystem. Bears are maintaining positions despite the risk that another upbeat outlook from Nvidia could reignite momentum across semiconductor shares. Qualcomm has become one of the most heavily shorted names in the space. Short interest recently reached roughly $11.8 billion on a notional basis, hitting the highest level in at least a decade, according to data from S3 Partners. The previous major buildup occurred in 2018, when bearish bets approached $10 billion as investors positioned around the company's ultimately abandoned acquisition of NXP Semiconductors . Even after recent share declines, short sellers have largely held their ground. Since Qualcomm's short position peaked in notional terms on May 12, the number of shares sold short has edged higher while the stock price has retreated, S3 data showed. QCOM YTD mountain Qualcomm year to date Micron is showing a similar pattern. Short interest remains just below a 52-week high, while bearish positioning in Nvidia and Intel also remains elevated relative to the start of the year despite easing from recent peaks. "There hasn't been capitulation on the short side," said Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners. "The speed of this move is so great. They've lost so much money that they want to see how much money they can make back if a pullback in stock prices occur." The reluctance to cover suggests some investors are increasingly questioning whether valuations across parts of the semiconductor industry can continue climbing after years of AI-fueled gains. Chip stocks have been among the biggest drivers of the market rally, helping major indexes repeatedly notch records as investors poured money into companies expected to benefit from rising spending on AI infrastructure. Still, betting against the group has often proved painful. Short sellers have repeatedly been forced to unwind positions as demand for AI-related hardware continued to exceed expectations and major chipmakers delivered stronger-than-expected results. The PHLX Semiconductor Index is still up more than 65% year to date after registering its first weekly loss in seven weeks.
