Short sellers see opportunity as chip stocks rally breaks, bears hold firm into Nvidia earnings

Chip stocks' recent stumble is giving short sellers a reason to stick with bearish wagers after spending much of the past year getting steamrolled by the artificial intelligence-fueled rally. Despite a pullback across semiconductor shares in recent sessions, traders betting against some of the industry's biggest names have shown little sign of retreating. Instead, short interest in stocks including Micron and Qualcomm remains near multiyear highs, suggesting some investors see the latest weakness as the beginning of a more meaningful crack in one of Wall Street's hottest trades. The positioning is especially notable with investors now heading into earnings from Nvidia on Wednesday after the bell — a report that has repeatedly acted as a market-moving catalyst for the broader AI ecosystem. Bears are maintaining positions despite the risk that another upbeat outlook from Nvidia could reignite momentum across semiconductor shares. Qualcomm has become one of the most heavily shorted names in the space. Short interest recently reached roughly $11.8 billion on a notional basis, hitting the highest level in at least a decade, according to data from S3 Partners. The previous major buildup occurred in 2018, when bearish bets approached $10 billion as investors positioned around the company's ultimately abandoned acquisition of NXP Semiconductors . Even after recent share declines, short sellers have largely held their ground. …