Jim Cramer Warns Nvidia And Apple Shorts May Let Stocks Rally Before Striking Again: 'Only Way They Can Get Out Of This Mess'

CNBC’s Jim Cramer believes that heavily shorted stocks, Nvidia Corp. NVDA and Apple Inc. AAPL, are likely to rally before the short sellers initiate further downward pressure on them immediately.

What Happened: According to Cramer, X post, the short sellers will wait for the stocks to increase in price before attempting to drive them down again.

This strategy, according to the host of ‘Mad Money,’ is the only viable way for the short sellers to “get out of this mess,” because by allowing a rally, they create an opportunity to cover their short positions at a potentially lower price after a subsequent decline.

Cramer thinks that short sellers are in a “mess” because of the recent rally in the stock prices, which can potentially create a short squeeze, forcing the short sellers out at a higher price.

This stems from the goal of a short seller to sell high and buy low. Therefore, they want to “cover” their short positions, which is to buy back the shares, at a price lower than the price at which they initially sold them. This difference is their profit.

Why It Matters: The Magnificent 7 stocks, which have declined on a year-to-date basis, have advanced over the last few sessions after President Donald Trump’s pause on the reciprocal tariffs.

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Stocks	Monday’s Premarket	Friday’s Performance	YTD Performance
Nvidia Corporation NVDA	3.16%	3.12%	19.80%
Apple Inc. AAPL	5.81%	4.06%	-18.74%
Microsoft Corp. MSFT	0.75%	1.86%	-7.20%
Amazon.com Inc. AMZN	1.17%	2.01%	-16.05%
Alphabet Inc. GOOG	1.22%	2.59%	-16.38%
Meta Platforms Inc. META	1.18%	-0.50%	-9.29%
Tesla Inc. TSLA	1.58%	-0.04%	-33.48%

The premarket advance was also followed by President Donald Trump temporarily exempting smartphones, computers, and semiconductors from new U.S. reciprocal tariffs on Friday. A 20% tariff remains on all Chinese goods, reversing part of a recently imposed 145% tariff.

Meanwhile, the Commerce Secretary Howard Lutnick indicated these electronics exemptions are temporary, and further tariffs could follow soon. However, Trump also said on Sunday that he would reveal the tariff rate on imported semiconductors in the coming week

Price Action: After a recovery on Friday, the Nasdaq 100 index was 15.9% lower than its previous high of 22,222.61 points. The S&P 500 index was down 12.75% from its record of 6,147.43 points, and the Dow Jones declined 10.78% from its 52-week high of 45,073.63 points.

The SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust ETF QQQ, which track the S&P 500 index and Nasdaq 100 index, respectively, were higher in premarket on Friday. The SPY was up 1.18% to $540.26, while the QQQ advanced 1.41% to $460.81, according to Benzinga Pro data.