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Wall Street Is Betting Against Tesla and Alibaba Like Never Before

The two day tech stock sell-off has come to a stop, with major companies like Apple, Amazon, and Netflix all rebounding slightly in trading Tuesday.

While that’s good news for investors who held onto their shares, it’s less so for short sellers, who reap winnings by betting on a stock’s fall. Tech companies Alibaba, Tesla, and Apple are now the three most shorted stocks in the world, according to S3 Partners head of research Ihor Dusaniwsky. The amount of those companies’ shares held by short sellers, known as short interest, has grown by 62% since the start of 2017 alone.

And with Alibaba and Tesla in particular, Wall Street’s bets against those stocks have never been higher, Dusaniwsky says.

In fact, short sellers are now betting against $16.7 billion worth of shares of Alibaba (BABA), the most highly shorted stock on the market today, up 71% since the beginning of this year. Meanwhile, short interest in Apple (AAPL) has risen 61% to $9 billion, while bets against Tesla (TSLA) stock have grown 51% to $10.7 billion.

But short sellers who have been holding on to their bearish positions all year have yet to see their bets truly pay off. For example, Alibaba stock has jumped 50% in 2017, while Apple stock is up 27% and Tesla shares have risen 76%.

Still, investors have reason to doubt whether such tech stocks can continue their feverish ascent.

Over the past year, the market value that tech investors have added to the stock market is the equivalent of another two Amazons (AMZN): about $1.1 trillion since June 2016. In total, the market cap of 69 tech stocks on the S&P 500 has soared 18% to $4.9 trillion as of Tuesday. The broader market, meanwhile, is up half that much, just 9%.

It remains to be seen if tech companies can meet investors’ lofty expectations. Mizuho analysts downgraded shares of Apple to “hold” Monday, while Morgan Stanley recently did the same for shares of Tesla.

Goldman Sachs analysts went as far as to compare the recent tech rally to the dot-com bubble, writing: “Parallels to the ‘Nifty-fifty’ and 1999-2000 are growing as their performance is even more pronounced on a risk-adjusted basis.”

But despite the tech sector’s stock market rise in 2017, it’s not the dot-com bubble all over again, at least not according to investment strategist Ed Yardeni.

In a Tuesday note, Yardeni said that near the end of the dot-com boom in 2000, the total market capitalization of tech companies in the S&P 500 information tech index accounted for 32.9% of all S&P 500 companies. Yet they could only claim to have made, at most, 17.6% of the earnings.

The discrepancy between tech companies’ valuations and their actual earnings is much smaller today, despite the most recent stock market rally. In May, the market cap of tech companies on the S&P 500 rose as high as 22.9% of the entire index, but tech companies also accounted for 22% of all earnings among the S&P 500 members.