The short sellers in the US stock market suffered heavy losses, with a whopping $120 billion gone up in smoke. Those who shorted Nvidia lost all their capital.

With the continuous rebound of the US stock market in recent months, the bears in the stock market have been hit hard. According to data from S3 Partners, short sellers have lost about $120 billion this year based on current market value, of which only the first half of June saw a loss of $72 billion.

The total short position in the US market in June exceeded $1 trillion, the highest level since April 2022, accounting for about 5% of all tradable stocks. The total short position at the beginning of the year was $863 billion.

The most actively shorted stocks by investors are also the most popular stocks in the market, including Tesla, Apple, Microsoft, Nvidia, and Amazon. Tesla surpassed Apple on June 8th to become the most heavily shorted stock, with a short position of 3.3% of the available tradable shares.

Tesla's stock price has skyrocketed by about 120% this year, while Nvidia's stock price has skyrocketed by nearly 200% this year. The other three stocks have risen by at least 40% this year. Shorting Tesla was a mistake, resulting in a loss of 78% and a capital loss of $12.4 billion. Shorting Nvidia resulted in a loss of 105%. The potential losses for short sellers are theoretically unlimited because they need to buy back the stocks they initially shorted.

Another characteristic of the current market is that more and more investors are using ETFs to short the market because the borrowing costs of ETFs are very low. As of the end of May, investors had shorted ETFs worth about $235 billion.

However, shorting ETFs does not necessarily mean being bearish on the market. Investors may be long on multiple stocks in a sector while shorting ETFs for hedging purposes. Some investors short inverse ETFs, which means they are actually long on the stock market. Shorting SQQQ (which provides three times the inverse return of the Nasdaq 100 index) and SOXS (which shorts the semiconductor ETF three times) are common operations.

Most of the above shorting operations are carried out by hedge funds and other institutional investors, highlighting their anxiety about the market's sharp rise. The main concerns of these investors are the few stocks that enjoy the feast of rising stock prices, overvaluation, and the possibility of further interest rate hikes by the Federal Reserve. In addition, some investors have increased their positions, including both long and short positions, hoping to catch up after missing the stock market's rise at the beginning of the year.

Some analysts believe that more pain may be yet to come for the bears. Currently, many institutions are increasing their positions in the US stock market, pushing up stock prices. The higher the market rises, the more those who are waiting on the sidelines will want to find a way back into the market.

Many top Wall Street analysts or fund managers are also cheering on the bears. "New Bond King" Jeffrey Gundlach recently stated that the stock market is showing signs of frenzy. This feels a lot like the situation before January 4, 2022. There were many bears and a lot of pessimism, and then the expected pullback occurred. In 2022, Michael Hartnett, known as "Wall Street's most accurate analyst" for predicting the market trend accurately, believes that the US stock market is unlikely to escape a major decline. He compares the current situation to that of 2000 and 2008, where a sharp rise was followed by a sharp fall. Hartnett's predictions for the US stock market this year were not accurate, and he analyzed the three main reasons for being "wrong": the US economy did not decline, credit did not tighten, and the AI market was bullish.