The Short Interest Monitor: IT, AAOI, RH

Tracking stocks with high and rising short interest can help traders gauge market sentiment, monitor positioning trends, and spot potential red flags in key market sectors. That's why our Short Interest Monitor—using data from the Financial Industry Regulatory Authority (FINRA) and Schwab.com—highlights equities that have recently seen a rise in short interest.

Our latest list features a wide range of stocks across multiple industries, including a few names that have made headlines in recent weeks.

Short sellers targeted Gartner (IT) in early April amid AI disruption fears that prompted multiple analyst downgrades. Most recently, Goldman Sachs (GS) downgraded Gartner to "neutral" and slashed its price target for the IT, research, and advisory company, citing the risk of AI disruption to its core research business. Gartner is also navigating multiple class action lawsuits that allege executives gave false or misleading statements on contract value and consulting segment growth rates. IT shares were down more than 36% year to date through April 27, and more than 12% of its shares were sold short.

The fiber-optic networking product maker Applied Optoelectronics (AAOI) also saw its short interest rise in the first two weeks of April, despite bullish price momentum. AAOI stock continued its surge this month after the company secured large orders from data center customers and announced the purchase of a new manufacturing facility in Texas. However, its more than 250% year-to-date rise sparked the interest of the short-selling firm Citron Research in mid-April. Citron argued in a widely cited short call that AAOI's lofty valuation, reliance on large customers like Oracle (ORCL), and limited pricing power make it primed for a correction. Roughly 13.5% of AAOI shares were sold short as of April 27.

Insider selling activity, earnings weakness, and a challenging luxury furniture market led short sellers to continue their campaign against RH (RH) in early April as well. Formerly known as Restoration Hardware, RH missed Wall Street's expectations in its fourth-quarter earnings report on March 31 and provided conservative guidance. On the company's earnings call, CEO Gary Friedman cited tariffs, housing market weakness, and "global discord" due to the Iran war as some of the headwinds that have affected results in recent quarters. Nearly 30% of RH's shares were sold short as of April 27.

Check out the table below to see our list of 10 equities with elevated and rising short interest. Each stock has a market cap of at least $2 billion and short interest that represents at least 10% of the company's total outstanding shares.

Shares of memory-chip makers such as Sandisk Corporation (SNDK) and Micron Technology (MU) have skyrocketed over the past year due to surging computer memory prices amid the AI infrastructure buildout. But it appears short sellers began to target these market darlings in early April. SNDK and MU saw their short interest rise 21% and 16%, respectively, from the previous reporting period. Nearly 7% of SNDK's shares and roughly 4% of MU's were sold short as of April 27. While neither stock could be considered highly shorted, their short interest levels have risen steadily in recent weeks. That could be a sign that at least some investors are questioning the sustainability of the AI-driven memory boom.

Airlines were once again targeted by short sellers due to concerns that the Iran war could disrupt energy markets and lead to jet fuel shortages. While major U.S. carriers were the first to see their short interest rise amid these geopolitical developments, international carriers were in focus in early April. Air France (AFLYY) saw its short interest spike more than 630% from the previous reporting period, and Air Canada's (ACDVF) short interest rose 76.5%. Meanwhile, China Southern Airlines' (CHKIF) and China Eastern Airlines' (CHEAF) short interest spiked 205% and 436%, respectively; Singapore Airlines' (SINGY) short interest also jumped 81%.

Schwab's list of highly shorted stocks includes a few key terms that should be clearly understood. There are also notable limitations to the FINRA data used in this series. Consider the following: 

FINRA requires broker-dealers to report total open short positions for all equity securities on their books twice monthly. It then compiles this data and releases it to the public on the seventh business day after the reporting settlement date. However, FINRA's short interest report does not include off-exchange short sale trades, and it only reflects a snapshot of short positions held by brokerage firms on two specific days each month. For more information, review FINRA's article titled "Short Interest — What It Is, What It Is Not." 

Our Short Interest Monitor includes four key statistics worth defining: current short interest, percentage short interest change from the prior reporting period, days to cover, and short interest as a percentage of shares outstanding.

• Current short interest represents the total number of open short positions held on brokerage firms' books for a given security, as reported by FINRA.
• Percentage change from the prior reporting period reflects the percentage increase or decrease in the total number of open short positions for a given security compared to the previous reporting cycle.
• Days to cover measures how many days—at average daily volume—it would take for all short sellers to buy back their borrowed shares and close their positions. Higher numbers typically indicate a stronger bearish conviction and greater risk of a short squeeze.
• Short interest as a percentage of shares outstanding represents the portion of a company's tradable shares that are currently sold short and not yet covered. A ratio above 10% is typically considered high, while a ratio of 20% or more may indicate more severe bearish sentiment and a higher potential for a short squeeze.

It's also worth noting that targeting battleground stocks is a high-risk tactic. While some traders may be hoping to participate in a short squeeze that can drive prices higher, stocks with high or rising short interest may have deteriorating fundamentals, rising competition, or other issues that could continue to weigh on their prices. Additionally, these stocks may experience increased volatility or have liquidity issues. And a single event—like a positive earnings report or lawsuit outcome—can quickly shift market narratives, leading to unexpected price moves.

Finally, short sellers should keep in mind that highly shorted stocks often come with equally high borrowing fees that can weigh on returns. Dividend payments are also deducted from short seller accounts on the pay date, and losses from short selling are theoretically unlimited. Short selling is risky, and there is no guarantee the brokerage firm can continue to maintain a short position for any period of time. A trader's position may be closed out by the firm without regard to the trader's profit or loss.