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Jan 28, 2019

S3 Analytics: NVDA Shorts Big Winners in Semiconductor Rout

NVIDIA Corp (NVDA) is down 13.8% today after cutting its fourth quarter revenue guidance due to weakness in both its Gaming and Datacenter divisions due to a decline in crypto and gaming chip sales; slowdown in the global economy, especially China; and macroeconomic factors “beyond their control.” With market-leader NVIDIA dropping significantly the rest of the Semiconductor Sector followed suit, with 4 out of 5 semiconductor companies in the red today.

NVIDIA is the most shorted stock in the Semiconductor Sector with active short selling since its November earnings announcement. Shares shorted has increased from 12.39 million shares to 19.21 million shares since mid-November, an increase of 55%, and NVIDIA short sellers have earned $1.3 billion in mark-to-market profits since then.

Today’s price weakness in the Semiconductor Sector has covered nearly a third of the mark-to-market losses that short sellers in the sector have incurred year-to-date. Of the 82 semiconductor stocks with active short interest, 64 are showing stock price losses today. Semiconductor short sellers were down $3.00 billion in mark-to-market losses prior to today but have recouped $893 million in mark-to-market profits today. NVIDIA shorts earned the lion’s shares of today’s mark-to-market profits, nearly recouping all of their year-to-date losses with a $420 million gain.

We are seeing mixed short side activity in the Semiconductor Sector today with continued short selling in NVDA, INTC, MU and TXN while net short covering in MCHP, AMD and QCOM. If investors feel NVIDIA’s negative guidance announcement is a bellwether for the sector we can expect more short selling and long selling in the sector and further price weakness as a result.

Want deeper insight into the above analysis?
Contact:  Ihor.Dusaniwsky@S3Partners.net
                 Managing Director Predictive Analytics, S3 Partners, LLC

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