As mistletoe goes up and holiday sweaters emerge from storage, Wall Street’s most famous bears aren’t baking cookies, they’re sharpening their claws. In a market seesawing between Santa-rally optimism and bubble paranoia, America’s top short-sellers are busy placing bets that certain stocks will end the year on the naughty list.
Welcome to Christmas 2025, where cheer is optional and skepticism is fully priced in.
Michael Burry vs. the AI Boom
If Wall Street had a recurring holiday villain, it would be Michael Burry. The investor made famous by The Big Short has built an entire career on showing up to parties early, then announcing the punch bowl is poisoned.
This year, Burry’s target is artificial intelligence.
Regulatory filings show that Burry’s hedge fund, Scion Asset Management, has taken sizable put option positions against Nvidia and Palantir, two of the most recognizable names riding the AI wave in 2025. These aren’t symbolic hedges. They represent meaningful downside bets that suggest Burry believes enthusiasm has outpaced reality.
In recent commentary tied to these filings, analysts noted that Scion’s portfolio has skewed defensive, with bearish exposure concentrated in high-growth tech. To Burry, AI stocks appear less like a technological revolution and more like déjà vu, echoes of dot-com valuations wrapped in modern buzzwords.
The reaction? Predictably split.
Some investors see Burry as the voice of reason in an overheated market. Others are happily betting against him, turning his bearish positions into rallying cries for bullish retail traders. Either way, when Burry places a trade, the market listens, even if it doesn’t agree.
Hedge Funds Join the Grinch Parade
Burry isn’t alone in his holiday pessimism.
According to a major Wall Street bank’s analysis earlier this year, hedge funds have been steadily increasing short exposure to some of the market’s most beloved mega-cap names, including Nvidia, Tesla, and AMD.
That’s notable, because these stocks sit at the intersection of the biggest narratives of the decade: AI, electric vehicles, and semiconductors. In theory, they’re the future. In practice, hedge funds appear increasingly wary of how much of that future is already priced in.
Some of this positioning may reflect hedging rather than outright conviction. Others see it as a seasonal recalibration, trimming risk after an extended rally. But the pattern is unmistakable: professional money managers are growing more comfortable betting that parts of tech could stumble before the new year.
In short, the bears have RSVP’d.
Where the Market Smells Blood
If you want to know where short-sellers are circling, look at short interest, the percentage of a company’s shares that have been sold short.
And few stocks have been more dramatic in late 2025 than iRobot, the company best known for the Roomba. In what might be the year’s most unexpected market plot twist, iRobot shares surged more than 70% in just a few days, driven largely by speculation that short-sellers were getting squeezed.
At one point, roughly 40% of iRobot’s available shares were sold short, a level that practically invites chaos. When prices started rising, bearish traders were forced to buy shares to close their positions, fueling even more upside.
It was a reminder that short-selling isn’t just risky, it’s theatrical.
For every carefully researched bearish thesis, there’s the ever-present risk that the internet decides otherwise. Sometimes fundamentals win. Sometimes momentum does. And sometimes a household vacuum cleaner becomes a market phenomenon.
Bears Without the Drama
Not all bearish bets come with the adrenaline rush of a short squeeze.
Many traders looking to profit from downside moves prefer inverse ETFs, which rise when their underlying index or stock falls. These products allow investors to express negative views without borrowing shares or worrying about margin calls.
In 2025, inverse ETFs tied to technology stocks, major indexes, and even individual companies have seen renewed interest. Funds offering inverse exposure to the S&P 500, Nasdaq, and select AI names have become popular tools for traders expecting volatility or pullbacks into year-end.
These instruments lack the cinematic flair of a single-stock short, but they offer something bears value just as much: control.
Bubble or Just a Breather?
At the heart of nearly every short bet this Christmas is the same question:
Is this a bubble, or just a pause before the next leg higher?
AI stocks have delivered enormous gains over the past two years, and even some bulls acknowledge that valuations are stretched. Earnings remain strong, but expectations are stronger. Any stumble, a cautious forecast, delayed deployment, or macro surprise, could give bears exactly what they’re waiting for.
Recent volatility in major tech names has only fueled this debate. Some investors see temporary weakness as healthy consolidation. Others view it as the first crack in a façade built on hype.
Short-sellers, unsurprisingly, lean toward the latter.
Bearish, But Not Apocalyptic
It’s important to note that short-selling in 2025 isn’t a blanket rejection of the market.
Data shows that bearish positioning is selective, not universal. Hedge funds aren’t shorting everything in sight, they’re targeting specific stocks where expectations appear extreme or narratives fragile.
Many large funds remain net long equities while using shorts as protection or tactical plays. This isn’t panic. It’s precision.
In other words, Wall Street isn’t betting on a collapse, it’s betting on gravity.
Retail Traders, Memes, and Schadenfreude
Of course, no modern short-selling story is complete without retail traders.
Online forums remain lively with debates, jokes, and not-so-subtle taunts aimed at short-sellers. Some celebrate every squeeze as poetic justice. Others relish the challenge of proving legendary bears wrong.
Michael Burry’s positions, in particular, have become a source of endless fascination, and mockery. Every rally in Nvidia or Palantir is treated like a scoreboard update. Every dip, a victory lap for the skeptics.
It’s chaotic, funny, and deeply human, a reminder that markets aren’t just spreadsheets. They’re stories we tell ourselves, collectively, in real time.
So, Where Are the Bears Betting?
As 2025 winds down, the picture is clear:
- Michael Burry is betting against AI heavyweights like Nvidia and Palantir
- Hedge funds are increasing shorts in select tech leaders, including Tesla and AMD
- High short-interest stocks like iRobot remain powder kegs for volatility
- Inverse ETFs are quietly absorbing bearish conviction across indexes and sectors
Will these bets pay off? Maybe. Or maybe Santa shows up late, rallies roar, and the bears retreat once again.
Either way, one thing is certain: while the market hangs lights and plays carols, America’s top short-sellers are watching closely, waiting for the moment when optimism slips on the ice.
And if it does? They’ll be ready.
