Hedge funds are betting that stocks in some of the market’s hottest sectors are headed for a fall, amid concern over how long the boom in electric vehicles, luxury goods and artificial intelligence will last.
Electric-car maker Tesla Inc., Gucci owner Kering and Japanese chipmaker Advantest Corp. were the large-cap stocks with the highest percentage of funds shorting them last month in their respective regions, according to data compiled by Hazeltree, which provides treasury services to institutional investors including hedge funds.
While investor bearishness typically is measured by the percentage of a company’s shares that have been sold short, the Hazeltree data captures how widespread that sentiment is among its fund-manager clients.
Hazeltree aggregates data on about 12,000 equities globally from about 700 funds. The New York-based firm calculates, on a scale of 1-99, how crowded a short trade is based on the percentage of funds shorting each stock. Tesla, Kering and Advantest each had a crowdedness score of 99.
A representative for Advantest declined to comment. Spokespeople for Tesla and Kering didn’t immediately reply to requests for comment.
Tesla shares have more than doubled this year, with the stock up almost 22,000% since listing in June 2010, on continued investor enthusiasm for electric-vehicle demand. Still, the carmaker last month warned of more hits to its profitability, with Chief Executive Officer Elon Musk saying Tesla will have to keep lowering the prices if interest rates continue to rise.
Advantest shares also have more than doubled in 2023 amid a frenzy over artificial intelligence, with the Japanese semiconductor maker seen as one of the beneficiaries of the AI boom. The company’s quarterly earnings last month missed expectations and it kept its outlook unchanged for the year, underwhelming analysts.
Meanwhile, a Big Tech-like rush into European luxury stocks has started to fade this year amid signs of a US slowdown. Kering, though, has underperformed throughout the luxury rally on concern that its Gucci brand is lagging behind rivals.
The biggest luxury company, LVMH, is the third-most-crowded short among large-cap stocks in Europe, the Middle East and Africa, the data show.
Still, the percentage of Tesla, Kering and Advantest shares owned by institutional investors that are being lent out is relatively low, representing 2.6% for Tesla, 0.9% for Kering and 8.7% for Advantest, Hazeltree’s data show.
That’s in contrast to EV maker Rivian Automotive Inc., where 33% of institutional shares were being lent out, the highest among large-cap stocks in the Americas. Its crowdedness score was 74. High-speed train maker Alstom SA’s reading of institutional shares on loan, also at 33%, was the highest among EMEA large caps, while its crowdedness score was 88, the Hazeltree data show.
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