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For weeks, many of the market’s top tech stocks have mostly trended downward with only marginal momentum. Nvidia (NVDA) is in danger of falling below $100 per share, and Tesla TSLA will be back below $250.
This has been due to a mix of factors, but negative market momentum caused by speculation seems to be at its core. The tariffs imposed by the Trump administration have generated significant uncertainty, and since more tariffs are on the horizon, this trend looks poised to continue.
This presents a complicated outlook for investors, especially in the tech sector. Although many companies have indicated plans to increase artificial intelligence (AI) spending in 2025, most tech stocks are facing an uphill battle as market conditions continue to shift against them.
Now, new data from one Wall Street firm shows a new trend that points toward a massive shift in investment strategy.
The bears are closing in on former big tech favorites
With entire sectors struggling recently, experts have speculated that the U.S. is heading towards a bear market. The combination of high uncertainty and rising consumer prices across many sectors is encouraging investors to trim their positions in many companies, fueling even more negative momentum.
Whenever market conditions show signs of moving from bad to worse, short-sellers typically close in on companies they see as having much further to fall. While they often target less stable companies, a new report from Morgan Stanley (MS) reveals that hedge funds are ramping up their bets against several of the tech sector’s biggest names.
Related: Short sellers are closing in on some shocking tech stocks
The companies in question are Tesla, Nvidia, and fellow AI chipmaker Advanced Micro Devices (AMD) . The first two, members of the Magnificent 7, a group of top stocks responsible for driving most of the sector's growth, have been down 15% for the past month.
AMD has slightly outperformed them both and is still in the green for the same period, albeit by only 1%. However, if hedge funds are betting against Nvidia, they will likely be just as bearish towards AMD, as the company produces similar AI chips and caters to similar customers. As Reuters reports:
“The hedge funds' move illustrates how hedge funds are becoming more bearish about the stock market after back-to-back years of gains of over 20% in the S&P 500. The index is down 2.6% this year, as concerns about U.S. trade policy weigh.
Their targeted short bets on companies such as Nvidia and Tesla also underscore hedge funds seeing at least some of the once popular Magnificent Seven shares of the biggest U.S. tech firms as expensive.”