AMD is up another 5% on Tuesday as short interest in the name reaches a record high. This year has been a bumpy one for the chip maker’s stock, although it’s up more than 17% for the full year and hasn’t again touched the low it reached in early May. But as is the case with several other tech stocks that have been on a major tear this year, AMD short interest is reaching nose-bleed levels.
It seems that the reason for today’s surge in AMD stock is its announcement about its new embedded graphics processing unit. The chip is based on the company’s Polaris architecture, and it’s slated for release this month. The Embedded Radeon E9170 Series GPU targets enterprise usage for applications such as retail signs, displays and casino games.
The processor can run up to five 4K displays at the same time while using relatively little power. Given how well AMD’s other new chips have done so far this year, investors clearly see big opportunities in this little chip, but of course, what’s good for the stock is bad for short-sellers. And as the stock price rises further, it just adds more fuel to the AMD short interest fire.
Brett Weiss of financial analytics firm S3 Partners said in a note today that AMD short interest hit a record high this week as bearish bets now stand at “an extraordinary 159 million shares” after an 83% increase in shares borrowed since the beginning of the year. He pegs the short side’s dollar amount at risk at $2.02 billion, a 105% increase year to date.
Despite the dramatic increase in AMD short interest so far this year, Weiss estimates that short-sellers are borrowing just 18% of the float; thus, if they wanted to increase their bearish bets, there is plenty of additional stock to borrow. Additionally, he said that AMD stock is extremely cheap to borrow, as it trades “at or near general collateral levels, the cheapest fee or easiest to borrow stock.” On balance though, short-sellers have lost $110.3 million year to date for a return of -6.6%.
AMD short interest isn’t the only one in the Semiconductors space that’s growing rapidly, according to S3’s data. Weiss said that short interest in Intel has risen to $4.72 billion on 121 million shares, and short-sellers have lost $227 million on their positions this year for a return matching that of AMD short interest.
Short interest in NVIDIA, on the other hand, has been shrinking, he added. NVIDIA short interest has fallen from 54.9 million at the beginning of the year to 17 million currently, according to the firm’s data. Bearish bets against the chip maker have tumbled to $3.1 billion from $5.9 billion, probably because the losses on NVIDIA shorts have been much greater than those on Intel or AMD short interest. NVIDIA short-sellers have lost $1.77 billion year to date for a return of 57.6% on their bearish bets.
Short-sellers are really counting on the overall Tech space hitting the skids, as bearish bets against the FAANG names (Facebook, Amazon, Apple, Netflix, Google/ Alphabet) have also been rocketing higher along with their stock prices, S3 Partners’ Ihor Dusaniwsky said in a note late last week. He said short-sellers have tacked another $1.93 billion onto their bearish bets against the FAANG names in the last six weeks alone, for a 7.6% increase in short interest against the entire group. Like AMD, the FAANG stocks also trade at general collateral levels.