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NVIDIA Corporation

Tech slowdown bolsters short-seller profits in Semiconductor sector, says S3 Partners

Further weakness in the sector may be coming to an end as the amount of short interest falls

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Amount of short selling in the semiconductor sector appears to be slowing down

A slowdown in the technology segment has allowed short-sellers to notch some $824 million in mark-to-market profits in the Semiconductor and Semiconductor Equipment Sector, a report by analytics company S3 Partners said.

The report said poor results from both Nvidia Corp (NASDAQ:NVDA) and Applied Micro Devices Inc (NASDAQ:AMD) enabled short-sellers in both companies to be "up $529 million and $162 million in mark-to-market profits, respectively."

But further weakness in the sector may be coming to an end as the amount of short interest in semiconductors appears to be slowing down.

"The Semiconductor & Semiconductor Equipment Sector has seen a decrease in overall short interest in the fourth quarter with a decline of $8.7 billion, or -19.06%, in just seven weeks even though short sellers were up $5.6 billion in mark-to-market profits, or +14.17%, over that same period," the report said.

READ: Nvidia misses on revenue in Q3, dragging the rest of the chip sector down with it

The shorts apparently believe the sector may be "nearing a price floor" after the sector-wide price weakness due to near-term revenue and guidance shortfalls relating to cryptocurrency equipment buying weakness, gaming chip weakness and data center revenue slowdowns.

The short interest in QUALCOMM Inc (NASDAQ:QCOM) has declined by about $4.8 billion, $1.7 billion in AMD and by $693 million in Nvidia "as short-sellers exited the sector," S3 said.

READ: Advanced Micro Devices misses on 3Q revenue as crypto miner demand deflates

Over the next few weeks, S3 said a trend should emerge in the sector.

"We will see over the next several weeks whether short-sellers will reverse their recent short covering trend and increase their short bets in the sector based on NVDA’s and AMD’s results or continue decreasing their short exposure to the sector favoring a longer term positive outlook over shorter term weakness," the report concluded.

Contact Rene Pastor by [email protected]

Quick facts: NVIDIA Corporation

Price: $181.07

Market: NASDAQ
Market Cap: $110.27 billion
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