Chip stock NVIDIA Corporation (NASDAQ: NVDA) continues to hit new all-time highs and recently became the most valuable company in the world.
While that move was short lived with a recent pullback, investors betting against Nvidia over the last year or year-to-date in 2024 are down big.
What Happened: A recent Nvidia stock split has increased the number of shares outstanding of the semiconductor giant. The move could help investors able to buy more whole shares, but may prevent a short squeeze in the stock.
There is $39.4 billion in short interest in Nvidia according to data from S3 Partners, which represents around 1.23% of the float of the company.
This makes Nvidia more shorted on a dollar basis than several other heavily shorted stocks shown below:
- Microsoft Corp (NASDAQ: MSFT): $24.3 billion, 0.74% of float
- Apple Inc (NASDAQ: AAPL): $23.7 billion, 0.72% of float
- Tesla Inc (NASDAQ: TSLA): $18.8 billion, 3.7% of float
Dusaniwsky called the $39 billion a bigger number than the 1.3% of the float shorted and said the stock "is an interesting short" for investors.
"You look back to Tesla to see those big numbers."
Dusaniwsky said over 50% of Nvidia shares are held by passive investors like mutual funds and ETFs.
The short selling data expert said it's hard to know who is driving the increased amount of shorting in Nvidia with momentum traders shorting and investors shorting as a potential hedge to the market.
"It's also a hedge to the overall market and the tech sector."
Dusaniwsky said there are a lot of people in the short trade of Nvidia.
Why It's Important: Dusaniwsky said the enormous amount of shares outstanding in Nvidia could make a short squeeze similar to what has happened in the past to GameStop Corp (NYSE: GME) and AMC Entertainment Holdings (NYSE: AMC) harder to happen.
The expert said the fact that more retail traders were involved in those names also made short squeezes easier to happen.
Dusaniwsky said Nvidia could see a small short squeeze of sorts if the stock continues to rise and shorts are forced to cover their positions.
"Shorts are down big," Dusaniwsky said.
Dusaniwsky said with 300 million shares shorted, there could be a run-up in Nvidia stock if the short sellers get squeezed.
The overall market is seeing record highs of short interest, Dusaniwsky added, but noted that the short interest gains are not going up as much as the gains to the long side.
The expert said this could be due to investors afraid of being short during the current stock market rally with indexes hitting new all-time highs, pending federal rate cuts and the upcoming 2024 presidential election.
"I don't see a huge amount of shorts coming into the market."
NVDA Price Action: Nvidia shares are down 2.78% to $127.21 on Friday versus a 52-week trading range of $39.23 to $140.76.