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The first half of the year was marked by uncertainty, volatility, and upheaval, which created some interesting dynamics for stock markets and investors.
In its Shortside Crowdedness Half Year Report, alternate asset data company Hazeltree looked at the short selling activity among hedge fund and alternative asset managers in this environment.
One of the key themes through the first six months of 2025, according to the report, was the shorting of technology stocks by fund managers, due largely to the volatility. However, for the most part, this did not include the mega cap Magnificent 7 (NYSE:MAGX) stocks. The only Magnificent 7 stock that appeared among the top 10 most shorted stocks in any of the first six months was Apple – which made the list in January and February.
Apple may not be much of a surprise, given how the stock has struggled, but it is even more surprising that Tesla was not among the most shorted.
“A modicum of surprise could perhaps be observed in the fact that TESLA did not appear during the entire six months, given the personal and political perturbations of the period,” Tim Smith, managing director of data insights and Hazeltree, wrote in the report.
Tech Names Are Among Most Shorted
Along with Apple, there were certainly other tech names that were heavily shorted during this volatile period, particularly in the first quarter.
“In the first part of the period, ‘tech’ was the main focus for the shortside, with some of the stalwarts of any investor’s portfolio appearing as a continuing part of the short side agenda,” Smith wrote.
Among the most shorted tech stocks were IBM (NYSE:IBM), which appeared in the top 10 in five out of the six months, and Super Micro Computer Inc (NASDAQ:SMCI), which made the top 10 in all six months of the year. In addition, Wolfspeed Inc (NYSE:WOLF), a semiconductor company, appeared regularly on the list of the most shorted stocks in the first half.
A “Short” Interlude
When an investor shorts a stock, they borrow shares and sell them, seeking to capitalize on the expectation that the stock price will decline in the short term.
So, for retail investors, the shortside report provides insight into where investors saw the most opportunity to take advantage of the volatility. But as Smith explained, just because a stock is heavily shorted, it is not necessarily a bad thing — and should not necessarily reflect negatively on its long-term viability.
“Shorting is simply part of ‘life’s rich tapestry’ in the world of capital markets and is actually a necessary, and some would say elegant, way to provide stabilizing influences,” Smith said. “For this reason, where we saw Apple as one of the top crowded shorts earlier this year, it was also one of the top long crowded positions. And remember, everything is relative. The market value of some of the securities being shorted by a lot of hedge funds can be very small in the great scheme of things, in this matter.”
Tariff Turmoil Hits Consumer Stocks
While tech names dominated at the start of the year, once the tariffs were rolled out in April, investors tended to focus more on shorting consumer discretionary stocks.
“However, the onset and realization that Trump’s tariffs initially would be implemented, then postponed, and then implemented again, increased would happen and then lessened, and postponed again, were also notable. The consumer side of the street took the main hits from this vacillation, but not universally so,” wrote Smith.
Looking ahead, while there may be more stability with new tariff deals in place and percentages mostly set, it remains to be seen what the impact of those tariffs will be in the second half of the year. It could create a challenging economic environment for some stocks, so it bears watching how fund managers navigate the environment.
“It will be interesting to see whether the short side decides to pick the sectors and industries in regions that might be more severely impacted. What we can predict is that the era of unpredictability will continue and this will be shown in Hazeltree’s Data Insights Monthly Shortside Crowdedness Reports,” Smith concluded.
