Shorts Are Returning to AppLovin Even After $3.2 Billion Squeeze

Short interest in AppLovin Corp. is notably increasing, reaching levels last seen in March, even after short-sellers faced an estimated $3.2 billion in paper losses over the past six months. This renewed bearish sentiment emerges despite the stock's 72% year-to-date surge, significantly boosted by its recent inclusion in the S&P 500, suggesting some investors view the current valuation or rally as unsustainable.

Analysis

Short-seller interest in AppLovin Corp. is resurging, with the volume of shares borrowed for shorting climbing to its highest level since March, according to S3 Partners LLC. This marks a significant reversal of the recent short-covering trend and comes despite short-sellers accumulating an estimated $3.2 billion in paper losses over the past six months. The renewed bearish sentiment is notable as it contrasts with the stock's powerful rally, which has seen it more than double from its April low and achieve a 72% gain for 2025. The latest price appreciation was explicitly driven by a technical catalyst: S&P Dow Jones Indices' decision to add AppLovin to the S&P 500. The increasing short positions suggest that a segment of the market views the current valuation as unsustainable and is betting that the momentum from the index inclusion will fade, leading to a price correction.

Key Decisions for Investors

• Investors with long positions should recognize the risk that the stock's recent gains, driven by the S&P 500 inclusion, may face pressure as index-related buying concludes and short interest builds.
• Traders contemplating a short position are betting against a strong technical tailwind and should consider that the cost to borrow may rise and momentum could persist longer than fundamentals might suggest.
• The conflict between technical-driven buying and renewed short-selling makes the stock's next fundamental catalyst, such as an earnings report, a critical event that could determine whether the new valuation holds.