Short sellers are feeling the pain in early 2025, with market gains delivering a heavy blow to those betting against stocks. According to data from S3 Partners, short sellers in the U.S. and Canadian markets have lost a staggering $73 billion so far this year.
“The rally in the market was not kind to short sellers,” said Ihor Dusaniwsky, head of predictive analytics at S3 Partners, in a statement to Yahoo Finance.
The S&P 500 (^GSPC) has climbed about 4% year-to-date, but several individual stocks have soared far beyond that, with some benefiting from dramatic short squeezes. Super Micro Computer (SMCI), the best-performing stock in the S&P 500 this year, has surged over 110%, resulting in more than $2.2 billion in short-seller losses.
As short sellers scramble to cover their positions, market momentum continues to accelerate, fueling further volatility.
Understanding the Short Squeeze Phenomenon
A short squeeze occurs when a heavily shorted stock unexpectedly rises, forcing short sellers to buy shares to close their positions. This creates a surge in demand, pushing prices even higher.
The most famous example of a short squeeze was GameStop (GME) in 2021, when the stock soared over 134% in a single day, fueled by retail traders and hedge fund liquidations.
“Short sellers are guaranteed future buyers,” noted JC Parets, chief market strategist at All Star Charts. “When shorts are getting squeezed, these can become forced liquidations.”
Super Micro, Hims & Hers, and AI Stocks See Major Gains
While Super Micro Computer (SMCI) has been the most high-profile short squeeze of 2025, it is far from the only stock seeing massive gains due to short covering.
Several other heavily shorted stocks have surged in recent weeks:
- Hims & Hers Health (HIMS) – Shares have gained over 80% year-to-date, with an additional 22% spike on Wednesday following the company’s announcement of an at-home lab testing service. Short sellers betting against Hims have lost nearly $2 billion.
- Oklo (OKLO) – The nuclear AI company has also seen a rapid increase in share price, driven by strong investor enthusiasm for alternative energy and AI-driven innovations.
- BigBear.ai (BBAI) – Another AI-focused stock that has experienced significant upward pressure due to short squeezes.
Tracking “Squeezable” Stocks
S3 Partners tracks a “squeeze score”, which measures how susceptible a stock is to a short squeeze. A score above 70 suggests the stock is vulnerable, while a reading over 90 indicates extreme susceptibility.
- Super Micro Computer (SMCI) has a squeeze score of 100, making it one of the most at-risk stocks.
- Hims & Hers Health (HIMS) also has a squeeze score of 100, suggesting continued volatility ahead.
- Oklo (OKLO) and BigBear.ai (BBAI) both have squeeze scores above 70, reinforcing their exposure to short-covering rallies.
Why Are Short Sellers Losing So Much Money?
Several factors are contributing to the heavy $73 billion in short-seller losses this year:
- Broad Market Rally – The S&P 500’s 4% year-to-date gain has lifted many stocks, especially those with strong growth narratives.
- Artificial Intelligence Hype – AI-related stocks have been among the top performers, attracting both institutional and retail investors.
- Bull Market Momentum – Analysts are seeing signs of a long-term bull market, with fewer opportunities for short sellers to profit.
- Retail Investor Activity – Individual investors have played a role in squeezing shorts, as seen in previous rallies during the GameStop mania of 2021.
“As more stocks, more sectors, and more countries around the world start to participate in this bull market, any short sellers who overstayed their welcome are getting blown up,” said Parets.
Wall Street’s Take on the Short Seller Struggles
Despite the losses suffered by short sellers, some analysts believe the market is showing healthy signs of strength.
“The short squeeze activity we are seeing now is a reflection of strong economic fundamentals,” said Dan Ives, a senior equity analyst at Wedbush Securities. “Many investors remain bullish on AI, tech, and consumer health sectors.”
However, not all analysts agree. Some believe that certain stocks are overextended and could see sharp pullbacks once short squeeze activity fades.
“The risk here is that once the short-covering runs out of steam, some of these stocks could see major corrections,” warned Michael O’Rourke, chief market strategist at JonesTrading.
What’s Next for Short Sellers?
The short squeeze trend is likely to continue as long as:
- The market remains in bullish territory
- Retail traders continue targeting highly shorted stocks
- AI and tech stocks remain hot investment themes
However, short sellers could stage a comeback if:
- Interest rates stay higher for longer, pressuring overvalued stocks
- Earnings season disappoints, leading to sharp declines in overbought companies
- Economic uncertainty increases, driving investors toward more defensive positions
Conclusion: Short Sellers Remain on the Defensive
The first two months of 2025 have been brutal for short sellers, with $73 billion in losses and a wave of short squeezes sending stocks like Super Micro Computer and Hims & Hers Health soaring.
While some experts believe the current rally is sustainable, others caution that extreme valuations could lead to future pullbacks. Either way, short sellers will need to tread carefully as bull market momentum remains strong.
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