Short Sellers Lose Billions as Stock Rally Continues
The start of 2025 has been challenging for short sellers who bet against stocks. According to data from S3 Partners, short sellers have lost $73 billion in US and Canadian markets since the beginning of the year.
"The rally in the market was not kind to short sellers," said Ihor Dusaniwsky, head of predictive analytics at S3 Partners.
The S&P 500 (^GSPC) has gained approximately 4% this year, driving up many companies within the index. Super Micro Computer (SMCI), the index's top performer, has surged over 110% since January. Short sellers have lost more than $2.2 billion on SMCI's rise.
Short squeezes occur when a significant number of investors bet against a stock and its price unexpectedly rallies. Forced to cover their positions, these traders buy the stock, driving its price even higher.
Short squeezes played a major role in the meme stock frenzy of 2021. "Short sellers are guaranteed future buyers ... when shorts are getting squeezed, these can become forced liquidations," noted JC Parets, chief markets strategist at All Star Charts.
S3 Partners uses a "squeeze score" to assess a stock's susceptibility to a short squeeze. Super Micro Computer currently has a score of 100, indicating extreme susceptibility.
Other stocks that have benefited from short squeezes this year include Hims & Hers Health (HIMS), Oklo (OKLO), and BigBear.ai (BBAI). All three stocks have rallied 80% or more.
Hims & Hers gained another 22% on Wednesday after announcing plans to introduce at-home lab testing. Short sellers have lost nearly $2 billion on the stock.
"As more stocks and sectors participate in this bull market, any overstayed short sellers are getting blown up," Parets wrote. "This is a classic characteristic of healthy bull market environments."