Key facts
- Short sellers are expanding their bearish bets across the AI value chain beyond chips.
- Companies targeted include SoundHound AI and Z.AI due to high valuations and monetization risk.
- Short interest in SoundHound AI is 33.57% of its outstanding shares.
- Shorting activity is increasing globally, including in Asia with companies like Quanta Computer and Wiwynn.
- Less than half of enterprise AI projects launched in the last year are on track to generate a positive return in 12 months.
Short sellers are increasingly diversifying their bearish bets within the artificial intelligence sector, moving beyond the concentrated focus on chipmakers to other areas of the AI ecosystem. This strategic shift reflects a maturing market where investors are scrutinizing which companies can translate AI investments into sustainable profits.
According to Matt Chessum, executive director of equity analytics products at S&P Global Market Intelligence, short-selling activity is now spanning software, robotics, autonomous vehicles, quantum computing, cloud infrastructure, and data center operators. This broader engagement suggests a growing discernment among investors about the viability of different AI-related businesses.
While some prominent short sellers, like Michael Burry, have previously expressed skepticism about the long-term sustainability of the AI chip trade, betting against companies like Nvidia and Micron Technology, recent data indicates a change in sentiment. Short sellers are no longer making uniform calls against AI hardware. Instead, they are concentrating their exposure on specific companies where factors such as valuation, funding, competitive positioning, or execution are more contentious.
Companies that have recently attracted short interest include former meme stocks that have seen a resurgence due to the AI trend. SoundHound AI and the Chinese AI model builder Z.AI are cited as examples, with short sellers targeting them due to high valuations and risks associated with monetization. Chessum noted that SoundHound AI has a significant portion of its outstanding shares on loan, indicating high short interest coupled with a visible but contested growth narrative. Similarly, Z.AI presents strong demand for lending, making it a valuable AI borrow.
S&P Global's data also highlights a global expansion of AI short bets, extending beyond the dominant US market. AI-linked companies in Asia, such as Quanta Computer and Wiwynn, are also experiencing increased shorting. This trend suggests that investor positioning has broadened from chip designers to encompass servers, memory, wafer production, and semiconductor equipment.
The increased scrutiny from short sellers mirrors ongoing uncertainty in the broader AI market regarding monetization strategies. S&P Global's analysis indicates that fewer than half of enterprise AI projects initiated in the past year are projected to yield positive returns within 12 months. This backdrop suggests that current securities-lending activity reflects a more developed market where investors are actively identifying companies capable of converting technological promise into sustained financial success, rather than a wholesale rejection of the AI theme.