Semiconductor Short Sellers Take $800M Hit From AMD Earnings Beat

Advanced Micro Devices, Inc. AMD shares jumped 12.8% following the company’s second-quarter earnings beat this week. Semiconductor stocks traded higher in sympathy with AMD, and short sellers took a major beating.

In fact, semiconductor short sellers took an $800.3 million paper loss on Wednesday, according to S3 Partners analyst Ihor Dusaniwsky. AMD was responsible for the lion’s share of those losses, as AMD short sellers took a $495.6 million hit.

But AMD short sellers weren’t alone. NVIDIA Corporation NVDA shares were up 2.8%, hitting short sellers with an $87 million loss. Taiwan Semiconductor Mfg. Co. Ltd. TSM shares were up 6.8%, costing short sellers $87.1 million.

Dusaniwsky said AMD has the largest outstanding short position of any stock in the semiconductor group at $3.53 billion followed closely by Nvidia at $3.13 billion.

“Based on year-to-date and today’s mark-to-market losses there is a good chance we see short covering in AMD, Nvidia and Taiwan Semiconductor as some shorts get squeezed out of their positions,” Dusaniwsky said.

Tough Year For Semi Shorts: Year to date, AMD short sellers have endured mark-to-market losses of $1.96 billion, making AMD the worst semiconductor short of 2020. Nvidia short sellers have taken a $1.77 billion loss, while Taiwan Semiconductor short sellers are down $404.9 million.

At the same time, not all semiconductor short sellers are getting fried in 2020. Intel Corporation INTC short sellers have turned a $446.7 million profit year-to-date, and Microchip Technology Inc. MCHP short sellers have gained $335 million in 2020.

Overall, however, 2020 has been a disaster for semiconductor short sellers, which have logged aggregate year-to-date mark-to-market losses of $4.2 billion.

Benzinga’s Take: Short selling is inherently a dangerous venture, and shorting momentum stocks like AMD and Nvidia has been a losing trade in recent years. Given Intel’s ongoing struggles producing its 7 nanometer chips, AMD could continue to bleed short sellers for the foreseeable future.

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