Staff Report
For weeks, some of the biggest names in the tech sector have been losing momentum, raising concerns about the long-term sustainability of their dominance. Nvidia (NVDA) is teetering on the edge of dipping below $100 per share, while Tesla (TSLA) risks falling beneath the $250 mark.
The downturn can be attributed to a range of factors, but prevailing market sentiment and speculation seem to be primary drivers. Additionally, economic uncertainty stemming from newly imposed tariffs by the Trump administration has added to investor anxiety, with more trade restrictions expected in the near future. This has made the outlook for tech stocks increasingly complex, despite companies pledging to ramp up investments in artificial intelligence (AI) by 2025.
Wall Street Bears Circle the Once-Unstoppable Tech Giants
With the market under pressure, analysts have begun speculating about a potential shift toward bearish conditions. Rising inflation and persistent uncertainty have led many investors to scale back their positions, contributing to negative momentum across multiple sectors. In response, hedge funds are ramping up short positions against major tech firms, signaling a strategic shift in market sentiment.
A recent Morgan Stanley report reveals that some of the biggest targets for short sellers include Tesla, Nvidia, and Advanced Micro Devices (AMD). Tesla and Nvidia—both members of the so-called “Magnificent 7” that have led much of the market’s gains in recent years—have each lost approximately 15% of their value over the past month.
Although AMD has managed to stay in the green over the same period, barely eking out a 1% gain, the company’s similarities to Nvidia in AI chip production make it a likely target for bearish investors as well. According to Reuters, hedge funds are becoming increasingly skeptical about the sustainability of tech stocks, particularly those that have enjoyed meteoric rises in recent years.
“The growing number of short positions reflects a broader hesitancy about the stock market’s stability,” the report notes. “After consecutive years of impressive gains exceeding 20%, the S&P 500 is now down 2.6% this year as concerns over U.S. trade policy intensify.”
This shift is further underscored by the underperformance of almost every Magnificent 7 stock, with the exception of Meta Platforms (META). Meanwhile, Tesla has been in the spotlight for reasons beyond stock performance—CEO Elon Musk’s high-profile controversies have sparked a backlash among consumers and investors alike.
Are the Magnificent 7 Losing Their Edge?
Since the AI boom took off in 2023 following the launch of ChatGPT, investors have been hyper-focused on the Magnificent 7, marking a transition from the prior FAANG era (Facebook, Amazon, Apple, Netflix, and Google). However, the increasing bearish sentiment toward key players within the group raises a critical question: Is the era of the Magnificent 7 coming to an end?
Goldman Sachs’ Prime Services desk recently noted that hedge funds have been slashing their exposure to tech stocks at the fastest rate seen in six months. While this suggests growing caution across the board, the latest Morgan Stanley report also indicates that hedge funds have recently unwound short positions in Apple (AAPL) and Google (GOOGL), signaling that not all major tech firms are facing the same level of skepticism.
For Tesla, the future remains highly uncertain. High-profile investors—including Musk’s own brother—have recently reduced their stakes or publicly questioned Musk’s leadership, adding to the company’s turbulent outlook. As hedge funds increasingly bet against Tesla and Nvidia, the tech sector may be facing one of its most significant shake-ups in years.
