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  • Writer's pictureThe San Juan Daily Star

Short sellers pocket record weekly profit from big tech selloff

Traders who bet against the “Magnificent 7” group of big U.S. tech stocks booked their biggest-ever weekly profit of more than $10 billion last week, with the biggest gains coming from their short position in shares of Nvidia and Tesla, Ortex data showed.


The chip designer shed almost 14% last week to clock its worst weekly fall in over 19 months, helping short sellers rake in more than $3 billion in profit.


The tech-heavy Nasdaq and the benchmark S&P 500 suffered six straight sessions of declines last week, their longest losing streak since October 2022, as the evidence of U.S. economic resilience and still-high inflation diminished hopes of an interest rate cut anytime soon.


Overall, the “Magnificent 7” shed close to $1 trillion in market capitalization last week, according to LSEG data.


Tesla, Meta Platforms, Alphabet and Microsoft will be in focus this week as the companies gear up to deliver their quarterly numbers.


“Weak iPhone sales data, poor delivery numbers from Tesla and regulatory pushback in the EU and the USA may all be weighing on sentiment, but the impact of the markets’ view on the direction of interest rates cannot be underestimated, either,” AJ Bell investment director Russ Mould said.


“Investors will be looking to six of them for reassurance when they report quarterly numbers,” Mould added.


Tesla, whose shares have lagged peers in the coveted group this year, also tumbled by an equal margin, leading to $3 billion in profits for short sellers.


Bets against Microsoft and Apple yielded $1 billion in profit each last week, according to the data.


The tech-heavy Nasdaq and the benchmark S&P 500 suffered six straight sessions of declines last week, their longest losing streak since October 2022, as the evidence of U.S. economic resilience and still-high inflation diminished hopes of an interest rate cut anytime soon.


Overall, the “Magnificent 7” shed close to $1 trillion in market capitalization last week, according to LSEG data.


Of the other megacaps, Apple and Amazon are set to report the following week, while Nvidia, whose shares have soared 70% this year on optimism over its artificial intelligence chips, reports on May 22.


Six of the seven, excluding Tesla, are expected to post collective earnings growth of 42.1% in the first quarter, UBS strategists said on April 8.


“It appears that the expectations are that they’re really going to deliver again,” said Patrick Kaser, portfolio manager at Brandywine Global. “And so the risk to me is skewed to the downside.”


Excluding the Magnificent 7, S&P 500 earnings have been negative on a year-over-year basis over the prior four quarters, according to JPMorgan analysts, underlining the group’s importance to the market.


Tesla, Meta Platforms, Alphabet and Microsoft will be in focus this week as the companies gear up to deliver their quarterly numbers.


“Weak iPhone sales data, poor delivery numbers from Tesla and regulatory pushback in the EU and the USA may all be weighing on sentiment, but the impact of the markets’ view on the direction of interest rates cannot be underestimated, either,” AJ Bell investment director Russ Mould said.


“Investors will be looking to six of them for reassurance when they report quarterly numbers,” Mould added.

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