Short Sellers Net $32 Billion as Semiconductor Index Hits Eight-Day Losing Streak

Short sellers captured $32 billion in gross paper profits over a seven-day period, according to S3 data cited by Bloomberg, as the Philadelphia Semiconductor Index (SOX) fell more than 12%. The sector benchmark extended its decline to eight consecutive trading days on Friday, a streak that puts it on pace to match its longest losing run since 2006. This sharp retreat in semiconductor stocks has been driven by growing market anxiety over elevated interest rates, high technology valuations, and massive capital expenditures for artificial intelligence.

The weakness in the chip sector has rippled into broader equity markets. The S&P 500 is set for a 1.7% weekly decline, marking its steepest drop since June, while the tech-heavy Nasdaq 100 fell 5% in the week ending October 16. Within the SOX index, 20 of the 30 constituent companies have lost more than 10% of their value since the downturn began. Coherent Corp. (COHR) led the losses, with its stock price diving nearly 30%.

A significant portion of this selling pressure is directed at CoreWeave Inc. (CRWV), an AI-focused cloud computing firm. Short sellers targeting CoreWeave logged over $1 billion in gains as the company's equity dropped more than 20% over the week. According to S3 data, CoreWeave's credit-default swaps now imply a probability of default exceeding 50% within the next five years, signaling distress in its debt instruments. The data also indicated that some of the short interest in CoreWeave is attributable to convertible bond arbitrage strategies rather than purely directional bearish bets.

Dec Mullarkey of SLC Management told Bloomberg that the aggressive run-up in chip stocks made some consolidation or pullback inevitable. Joe Tigay, portfolio manager of the Rational Equity Armor Fund, added that CoreWeave specifically will need a new story and time to digest its current reality.

On Friday, the SPDR S&P 500 ETF (SPY) dropped 1.2%, and the SPDR Dow Jones Industrial Average ETF (DIA) eased 0.5%. The Nasdaq-100 tracking Invesco QQQ Trust (QQQ) fell 2.5% on the same day.