Nvidia shares have experienced a series of sharp declines following record price increases, creating a bargain for short sellers. According to data analysis firm Ortex Technologies, short sellers profited 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. This drop came right after Nvidia surpassed Microsoft and Apple to become the most valuable company in the world the previous week.
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. 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.
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, recording a 145% increase since the beginning of the year 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, forecasting revenue of $28 billion for the current quarter.
The sharp decline could be attributed to several reasons such as increased competition from other companies like AMD or Intel or concerns about China’s economic slowdown affecting demand for high-end graphics cards used by gamers and data centers alike.
In conclusion
