Short Sellers Gain $32 Billion as Chip Stocks Rout

Short sellers accumulated approximately $32 billion in gross paper profits over a seven-day period as semiconductor stocks experienced a historic rout. The Philadelphia Semiconductor Index (SOX) fell 16% since October 6, marking its longest streak of declines since 2006 and the worst since the 2008 global financial crisis. The index closed Friday at 11,137.29 after an eight-session losing streak, dragging down the Nasdaq Composite and S&P 500.

The selloff was driven by concerns over high technology valuations, rising borrowing costs, and the sustainability of heavy expenditures on AI infrastructure. Pressure intensified following hotter-than-expected U.S. inflation data, which suggests interest rates may remain elevated. Broadcom CEO Hock Tan cautioned that the sector may face funding constraints, comparing some AI investors to gamblers.

Market volatility hit individual companies hard, with 20 of the index's 30 components dropping more than 10%. Coherent fell nearly 30%, while Arm Holdings slid 7%. CoreWeave saw shares slump amid concerns over its $50 billion debt load, positioning traders betting against the company for gains exceeding $1 billion. Additional pressure stemmed from reports that China's ChangXin Memory Technologies has made progress on advanced memory chip architecture.