Shorts Bets against Nvidia Corporation (NVDA) yielded record profits exceeding $6 billion after Chinese AI start-up DeepSeek disrupted the market. Nvidia saw a nearly 9% surge on Tuesday, bouncing back from the previous day’s steep drop that wiped out $589 billion from its market value. The significant decline in NVDA shares pulled down the entire technology sector, causing the Nasdaq Composite index to drop by 612 points.
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Nvidia Short Sellers Cash in $6B
According to a data analytics firm Ortex, traders who bet against Nvidia made around $6.6 billion in profits, marking the largest single-day move in the stock’s history. Meanwhile, short sellers targeting chipmaker Broadcom (AVGO) secured over $2 billion in profits.
Additionally, declines in server Super Micro (SMCI), data center provider Equinix (EQIX), and energy company Vistra (VST) on Monday, resulted in combined profits of over $900 million for short-sellers.
What is Short Selling?
Short selling, or short bets, is a strategy where an investor borrows shares of a stock they expect to drop in price. They sell the borrowed shares at the current price, then buy them back at a lower price if the stock falls. The profit is the difference between the selling and buying prices. However, if the stock price goes up instead, the investor faces a loss.
DeepSeek Sparks $1 Trillion Market Meltdown
The AI-led stock market crash led to a $1 trillion vanishing from the U.S. stock market. This drop was triggered by concerns that DeepSeek’s budget-friendly AI model, which uses lower-capacity chips, could threaten popular AI models. Overall, investors fear that U.S. tech companies may have over-invested in developing their own AI applications, which heavily depend on Nvidia’s chips and processors.
Notably, DeepSeek recently launched its advanced AI model, DeepSeek R1, which gained attention for its high performance and low cost. Built to improve reasoning and analysis, DeepSeek R1 is seen as a serious rival to popular AI models like OpenAI’s GPT.
Is NVDA a Good Stock to Buy Now?
With 37 Buys and three Holds, NVDA stock has a Strong Buy consensus rating on TipRanks. The average NVDA stock price target of $178.32 implies a 38.24% upside potential.
