We recently published a list of 12 Most Shorted Stocks in 2025. In this article, we are going to take a look at where Applied Digital Corporation (NASDAQ:APLD) stands against other shorted stocks in 2025.
Reuters reported that President Trump’s tariffs have impacted the broader stock markets, weighing on investors’ sentiments, as worries related to the economic slowdown drove a market sell-off which wiped out ~$4 trillion from the S&P 500’s peak last month, when the markets cheered Trump’s agenda. New Trump policies have resulted in increased uncertainty for businesses, consumers, and investors.
Average Short Interest Saw a Decline
Reuters, while highlighting the comments made by Peter Orszag (CEO of Lazard), mentioned that the uncertainty which is created by tariff wars regarding Canada, Mexico and Europe continues to prompt the top executives to reconsider the forward-looking strategies. Furthermore, while the tensions with China remain understandable, investors are confused with worries related to Canada, Mexico, and Europe. If this doesn’t get resolved over the next month or so, there can be real damage to the broader economic prospects of the US and M&A activity, says Orszag.
As per S&P Global’s long/short report (February 2025) dated February 14, the average short interest throughout US equities fell to 76 basis points over the month. However, short interest increased throughout several sectors during the period. That being said, Consumer Durables saw a 5-bps rise and REITs encountered a 4-bps increase. Notably, the largest decreases were seen throughout the Household and Personal Products sector (-7 bps), and the Consumer Services (-6 bps) sectors.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Trends in US Short Selling
The US markets have reversed their January rally with a weak February, says Ihor Dusaniwsky (Managing Director of Predictive Analytics). On February 28, Dusaniwsky stated that markets are down for the year, with the Nasdaq index seeing the brunt of the sell-off. The US short sellers were down $45.8 billion (3.42%) in January mark-to-market losses. Notably, two-thirds of every dollar shorted in January remained unprofitable and only 33% were profitable. With markets trending downward, there has been an increase in short selling throughout most of the sectors in the US/Canadian markets, says Dusaniwsky. If the weakness in the market continues, there can be increased short selling.
Our Methodology
To list the 12 Most Shorted Stocks in 2025, we used a screener and shortlisted the most shorted stocks. Next, we mentioned the hedge fund sentiment around each stock. Finally, the stocks are arranged in ascending order of their hedge fund holdings, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
An overhead view of a large-scale data center with rows of servers and blinking lights.
Applied Digital Corporation (NASDAQ:APLD)
Number of Hedge Fund Holders: 42
Short % of Shares Outstanding (as of February 28): ~25.4%
Applied Digital Corporation (NASDAQ:APLD) is engaged in designing, developing, and operating digital infrastructure solutions and cloud services for the high-performance computing (HPC) and AI industries. Analyst Kevin Dede from H.C. Wainwright reiterated a “Buy” rating on the company’s stock with the price target of $12.00. The rating is backed by several factors highlighting the company’s strong growth prospects. One major factor is Applied Digital Corporation (NASDAQ:APLD)’s recent financing deal with Macquarie Asset Management, says the analyst. The company has entered into a $5.0 billion perpetual preferred equity financing facility, with investment vehicles of funds managed by MAM, for its HPC business conducted via APLD HPC Holdings LLC.
The partnership validates Applied Digital Corporation (NASDAQ:APLD)’s business model and significantly reduces the capital requirements, enabling it to expand data center capacity efficiently. The analyst believes that the support from Macquarie can enhance Applied Digital Corporation (NASDAQ:APLD)’s credibility and help it secure major leases with hyperscalers, fueling the growth trajectory. The company’s emphasis on AI-enabled computing power remains in line with the elevated demand trends in the market. The company was one of the first companies to recognize the increased demand for power and data centers. Expecting the requirements, it started the construction of its facilities ahead of many hyperscalers, fully tapping the opportunities coming from the shifting demand landscape.
Overall, APLD ranks 1st on our list of most shorted stocks in 2025. While we acknowledge the potential of APLD as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than APLD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
