Short selling, or betting that a stock will go down, is experiencing a resurgence on Wall Street. According to market data firm S3 Partners, short positions across US and Canadian equities surged 4% in June to $2.39 trillion, a record in data going back to 2010.

Why the Increase in Short Selling?

The increase in short selling is driven by investors preparing for a potential pullback in the market. With the highly concentrated, tech-centric momentum trade putting more investors on edge, shorting is becoming a more attractive strategy. Short interest for the median S&P 500 stock has surged to 3.2% of market capitalization, the highest level since the 2008 financial crisis.

The surge in short interest coincides with a bearish sentiment creeping into the AI trade, which has propped up the entire market for nearly four years. Buzzy semiconductor stocks that surged earlier this year have struggled to maintain their momentum, and investors are increasingly nervous about when and whether the mind-boggling sums being spent by Big Tech on data centers will ever generate returns.

What is Short Selling?

Short selling involves borrowing a stock to sell it high in the hopes of repurchasing it at a cheaper price later and pocketing the proceeds. It’s a risky strategy, as losses can theoretically go on forever if the stock keeps trading higher. However, for investors who have done their homework, short selling can be a lucrative way to profit from a declining market.

Original reporting: KTVZ (Central Oregon) — read the source article.