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Published: February 8, 2024 at 6:08 PM ET
Arm Holdings stock easily hit a record high on Thursday, with short sellers gaining 48% in a single day in the process.
S3 Partners said the shorts took a $445 million paper loss as Arm’s stock price soared on the profits. The move highlights how shorting semiconductor stocks “has not been a profitable trade” this year, S3’s Eichor Dusaniowski said in a report.
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Arm Holdings stock easily hit a record high on Thursday, with short sellers gaining 48% in a single day in the process.
Shorts had a paper loss of $445 million on Arm stock.
arm
S3 Partners said its stock price soared on the earnings. The move highlights how shorting semiconductor stocks “has not been a profitable trade” this year, S3’s Eichor Dusaniowski said in a report.
Companies that made bearish bets on the sector have shaved more than $7 billion off their mark-to-market losses so far this year, with about a fifth of those losses occurring on Thursday alone, he noted. .
See also: Arm proves early AI winner, shares soar 50%
A significant portion of the semiconductor sector’s paper losses on Thursday were linked to Arm, while daily paper losses for companies that shorted Broadcom stock were large.
AVGO
,
Taiwan Semiconductor Manufacturing Co., Ltd.
TSM
and Monolithic Power Systems Co., Ltd.
MPWR
Each amount was over $100 million, according to S3.
Mr. Dusaniwsky reported that Arm’s short interest was $957 million and approximately 12.4 million shares were sold short, representing approximately 1.22% of the stock’s float. Arm ranks 14th among short sellers within the semiconductor sector.
“We expect the short selling trend we’ve seen in ARM to reverse in 2024, as short sellers get squeezed out of their positions,” said Dusaniowski, managing director of predictive analytics at S3. “Short covering on today’s rally will continue over the next few days as short sellers look to recoup some of their upside losses as they reduce their exposure, targeting a slight rebound to the upside.”
Chip designer Arm surprised investors late Wednesday with better-than-expected results that underscored the momentum of the company’s new architecture and traction related to the artificial intelligence craze.
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“The increase/introduction of accelerated compute/AI workloads in the data center, edge, and endpoints is driving requirements for significantly more computing power and power efficiency per device, and ARM customers are (Harlan, J.P. Morgan) Intellectual Property Suhr wrote in a note to clients.
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