Hedge funds are aggressively shorting software stocks, while Elon Musk's net worth approaches 6 trillion yuan, making him the wealthiest individual in recorded history.
Good morning! Numerous significant events unfolded overnight and into this morning. Major U.S. stock indices closed mixed, with large-cap tech stocks mostly declining and Chinese concept stocks falling broadly. Elon Musk's net worth neared 6 trillion yuan, establishing him as the first person in human history to surpass the $800 billion wealth milestone. Hedge funds initiated substantial short positions against software stocks, while gold and silver experienced significant volatility.
The three major U.S. stock indices ended the session with mixed results. The Dow Jones Industrial Average rose by 0.53%, whereas the S&P 500 index fell by 0.51%, and the Nasdaq Composite dropped by 1.51%.
Amgen led the gainers on the Dow, climbing over 8%, followed by Nike, which advanced more than 5%.
Large-cap technology stocks were predominantly lower, with the Wind US Tech Seven Giants Index declining by 1.32%. Tesla Motors led the declines among the seven giants, falling 3.78%, while Nvidia dropped 3.41% and Facebook decreased by 3.28%.
According to the Forbes real-time billionaire list, Elon Musk has become the first individual in history to amass a net worth exceeding $850 billion (approximately 5.92 trillion yuan), crossing the unprecedented $800 billion threshold. His space exploration company, SpaceX, has completed the acquisition of artificial intelligence startup xAI, a deal that values xAI at $1.25 trillion (with SpaceX valued at approximately $1 trillion and xAI at around $250 billion). This transaction precedes a potential blockbuster initial public offering for SpaceX later this year. Musk announced the deal on his blog on February 2 local time, stating that the primary objective of the merger is to enhance the development of an "orbital data center." This acquisition directly added $84 billion to Musk's net worth, establishing SpaceX as his most valuable asset.
Chinese concept stocks saw widespread declines, with the Nasdaq Golden Dragon China Index falling 1.95% and the Wind China Concept Tech Leaders Index dropping 2.80%. NetEase led the declines among the index components, falling 5.41%, followed by Baidu Group, down 4.77%, and Tencent Holdings, which decreased by 4.14%.
Reports indicate that hedge funds are significantly increasing their short bets against software stocks, intensifying the sector's severe sell-off that has characterized the year so far. Data from S3 Partners reveals that short sellers have already realized $24 billion in profits from software stocks this year, while the sector's overall market capitalization has shrunk by $1 trillion. Sources from hedge funds declined to comment on specific stocks targeted by these large short positions but indicated the focus appears to be on companies providing fundamental automation services that are easily replaceable by new AI tools. Just as hedge funds can swarm into momentum trades, investors also seek out stocks experiencing cliff-like declines amid indiscriminate selling to amplify their short bets. The software sector currently exemplifies this trend, with the iShares Expanded Tech-Software ETF (IGV) falling 8% this week and down over 21% year-to-date. Since reaching a record high last September, the ETF has declined by 30%. Gil Luria, an analyst at DA Davidson, stated, "Hedge funds are currently net short software stocks." Investors in the software industry are increasingly convinced the sector may be undergoing a "structural change," potentially leading to more transactional activity, including acquisitions by larger firms. Short sellers borrow shares from brokers to sell, aiming to repurchase them at lower prices later to profit from the difference. According to S3 Partners, stocks within the ETF such as TeraWulf and Asana currently face the largest short interest. For TeraWulf, over 35% of its tradable shares are sold short, while the figure for Asana is 25%. Data also shows that 19% of Dropbox's and 17% of Cipher Mining's free float are respectively sold short. The worst performers within the IGV ETF this year include tax preparation software maker Intuit and PDF/document processor DocuSign, both down over 30%. Additionally, Microsoft and Oracle have fallen 15% and 21% respectively, while Salesforce, Adobe, and ServiceNow have each declined more than 20%. A banker noted that, on a positive note, significant panic has not yet emerged on the credit side of the industry, and revolving credit facilities remain untapped. Some analysts suggest sentiment in the public markets could shift quickly, with several software companies scheduled to report earnings in the coming days.
International precious metals futures experienced substantial volatility before generally closing higher on February 4 local time. COMEX gold futures surged as much as 3.63% before reversing sharply, ultimately settling at $4,986.40 per ounce, a gain of 1.04%.
COMEX silver futures also saw dramatic moves, rallying 10.46% to touch $92.02 per ounce before reversing course and falling towards $83, finally closing at $87.77 per ounce, up 5.36%.
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