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Short sellers are increasingly looking for cracks beneath the stock market’s artificial intelligence frenzy, betting that some of the excesses of speculation, AI copycat brands and fragile traditional business models will eventually fade away.
With billions of dollars flowing into data centers, semiconductors and AI software, some short sellers argue that this bull market is starting to resemble the speculative mania of old, in which weaker companies scrambled to seize on the most popular market themes in hopes of attracting investors and retail traders.
“A rising tide lifts all boats, but a crooked tide sinks many names in the same region,” Fact Capital founder Joyce Meng said during a panel discussion at the Thorne Investment Conference in New York this week. “One of our favorite topics is fake AI, especially in a market where there is an AI craze and everyone is trying to jump into it.”
Meng said he likes to conduct screenings to identify companies that suddenly changed their names to take advantage of the boom. This includes companies that suddenly changed their names to include the word “AI.”
One of the targets Meng identified using the “AI Company Name Change” screen was Rezolve AI, which changed its name from Rezolve Group Limited in 2023. After doing a deep dive into the company, Meng said he identified multiple red flags regarding the business and predicted a 60% decline in the stock price.
Meng also mentioned a Chinese landscaping company that later reinvented itself as an AI server business. During an investigation into her company, she said it appeared to have photoshopped products as marketing materials on its website and claimed to have hired employees listed on LinkedIn who did not actually work there, according to a check by Fact Capital.
These examples reflect some of the increasingly unrealistic corporate axes that are emerging amid the AI boom. Struggling shoemaker Allbirds announced last month that it would rebrand itself as “NewBird AI” and move into computing infrastructure. The stock initially soared 582% following the announcement on the back of massive retail flows, but regained most of its gains within weeks.
Allbirds’ initial spike and the overall rise in stock prices shows what these short sellers are up against and why the number of short sellers has decreased as this bull market progresses. They borrow stock, sell the stock, and then buy it back at a lower price in hopes of recovering the difference, hence their name. If the name rises, you may be forced to buy back the stock to avoid big losses.
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Allbirds from this year to the present
“Trying to find more of the surplus that people claim they have but don’t actually have is a very rich opportunity for ideas for us,” Meng said.
Since its founding in 2019, Fact Capital has generated positive returns from short positions. Meng said he likes to combine speculative “fake AI” shorts with secular decline stocks across the technology industry, which tend to have lower volatility. He also highlighted Indian business process outsourcing companies and contact center operators in particular as sectors potentially vulnerable to AI disruption.
Rezolve AI declined to comment. The company reported first-quarter sales of $60 million, which exceeded its total sales for all of 2025.
Nvidia becomes bearish
Some bearish investors are starting to directly challenge the market’s biggest winners. Calper Research disclosed its short position in Nvidia on Wednesday, arguing that the chipmaker faces undervalued risks related to its China exposure.
“We recognize the risks. NVIDIA holds the single largest market capitalization on the planet, while CEO Jensen Huang is hailed as a generational genius in business,” Culper said in the report. “There’s one reason we’re short on Nvidia: They have a serious China problem.”
Short sellers argued that despite the imposition of U.S. export controls in April 2025, more than 20% of NVIDIA’s fiscal 2026 computing revenue is still tied to China through illegal GPU diversion and intermediaries in Southeast Asia. Nvidia has officially announced that its business in China has virtually dropped to zero due to the restrictive measures.
Nvidia did not immediately respond to CNBC’s request for comment.
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Nvidia Year to date
Still, shorting in a bull market is not easy. Major U.S. stock indexes have repeatedly risen to record highs, despite ongoing wars in the Middle East and widespread macroeconomic uncertainty, as investors continue to pour money into chipmakers and giants linked to the AI boom.
These short sellers joined Michael Varley, who has emerged as one of Wall Street’s most vocal AI skeptics. The well-known investor recently warned that investors should “reject greed” and “reduce positions almost completely” in stocks that go parabolic.
reverberations of history
Many draw parallels between today’s AI-driven stock market rally and the speculative excesses that preceded the collapse of many internet stocks during the dot-com era. Blue Orca Capital CIO Soren Aandahl said investors often confuse innovative technology with guaranteed investment success.
“Railroads changed the world. The Internet changed the world,” Erdahl said during a panel moderated by Jim Chenos. “But many of the early companies offering these technologies have completely gone out of business.”
Mr. Chanos, one of Wall Street’s most famous short sellers, cited the dot-com era as an alarming example. Mr. Chanos said that U.S. economic growth and corporate profit growth in the 10 years since Netscape’s debut in 1995 has remained largely unchanged from the previous decade, despite the Internet’s transformative impact.
“There’s no question that the Internet has changed a lot of things,” Chanos said. There was “no huge impact” on total economic growth.
Netscape, the pioneering web browser, was one of the defining symbols of the dot-com bubble until it was acquired by AOL in 1999.
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