Short-Selling Trends Expose Market Anxiety: Which Stocks with Most Short Interest Are Wall Street Targeting?

The landscape of hedge fund positioning reveals an intriguing paradox. While the broader market has recovered from recent volatility, institutional money is increasingly bearish on select sectors and individual stocks. Goldman Sachs’ latest hedge fund holdings analysis—tracking 982 funds managing $4 trillion in equities ($2.6 trillion long, $1.4 trillion short)—paints a fascinating picture of where sophisticated investors see vulnerabilities.

The Short Interest Surge: Numbers Tell the Story

After a remarkable rally, short interest in S&P 500 constituents sits at 2.4% of total market cap—the 99th percentile over the past five years. This is striking. The Nasdaq 100, tech-heavy and AI-focused, shows even higher short positioning at 2.5%. But the real shocker? Russell 2000 small-cap constituents now sport a median short ratio of 5.5%, signaling deep skepticism about smaller equities in this environment.

More notably, the utilities sector experienced an unusual spike. Short interest jumped 0.3 percentage points to 3.2%—among the highest levels on record. This counterintuitive move reflects a strategic positioning: as AI data centers consume massive energy, utilities that don’t benefit proportionally from this trend face short attacks. American Electric Power exemplifies this dynamic, with shares climbing 31% YTD and a $65 billion valuation, yet short interest remains elevated at 4% (historically 1-2%).

Which Stocks with Most Short Interest Draw the Heaviest Fire?

The holdings report reveals a split between mega-cap AI players—which remain the most held long positions (Amazon, Microsoft, Meta, Nvidia, Alphabet)—and a widening group of short targets. The top ten most shorted stocks include Tesla, Palantir, Palo Alto Networks, JPMorgan, Robinhood Markets, Costco, Bank of America, IBM, Oracle, and Lam Research.

In absolute dollar terms, the picture shifts. Oracle carries $5.4 billion in short positions, Intel $4.6 billion, and GE Vernova $4.1 billion—all newcomers to heavyweight short lists. These reflect market skepticism about AI-adjacent businesses with execution risks or valuation concerns.

The Real Story: Relative Positioning

Yet aggregate short dollars don’t tell the complete story. When Goldman Sachs normalized short interest by market cap, a different cast emerged. Among companies exceeding $25 billion in capitalization, Bloom Energy represents the most shorted stock relative to its size. The list continues with Strategy, CoreWeave, Coinbase, Live Nation, Robinhood, and Apollo—a mix of companies facing sector headwinds or perceived growth challenges.

This matters because it reveals where hedge funds believe execution risk is highest relative to current valuations. Coinbase, despite crypto market strength, remains under pressure from institutional shorts. CoreWeave faces competition and margin concerns. The pattern suggests funds are not uniformly bearish on innovation—they’re selective, targeting what they perceive as overvalued or challenged implementations of emerging trends.

What This Signals for Markets Ahead

The combination of elevated short interest and selective targeting reveals institutional ambivalence. Funds aren’t shorting the AI boom wholesale; rather, they’re making nuanced bets on which companies will disappoint. The utilities paradox—shorting energy stocks despite explosive demand—suggests funds fear these beneficiaries won’t capture sufficient margin expansion.

Credit stress indicators support this caution: Oracle CDS trading volumes have surged, and industry insiders acknowledge “signs of a bubble” in valuations. Yet rather than a wholesale reversal, this appears to be the market’s way of differentiating winners from losers—shorting perceived weak links while maintaining exposure to dominant platforms. This selectivity may explain why volatility remains contained despite the elevated short positioning.

The data suggests the next significant move may not come from shorts on mega-cap AI leaders, but from successful squeezes in heavily short positions where sentiment is most crowded.