Short sellers have reaped almost US$50 billion of gains this year from betting against some of the biggest technology companies, and some bears see further profits in 2023.

Even after this year's 28% slump in the Nasdaq 100 Index, many of the stocks are still expensive relative to their estimated sales or earnings, sceptics have said, a sign that some of the froth from a multi-year bull market still remains to be blown away.

The 10 most-shorted companies have delivered US$49.2 billion in combined mark-to-market gains for bears through Friday, according to data-analytics firm S3 Partners. Tesla Inc leads with almost US$12 billion in paper profits for shorts, followed by Amazon.com Inc and Meta Platforms Inc. The top 10 also include Apple Inc and Microsoft Corp.

"The reason we are so attracted to the technology sector is because there are still a ridiculous amount of companies out there that are trading at 10, 15, 20 times price to sales," said Brad Lamensdorf, a manager of the AdvisorShares Ranger Equity Bear ETF. Such multiples are "absurd", he said, adding that "the odds of that position being profitable over time for an investor is so low that they are a great pool to fish from".

Short sellers - who borrow shares and sell them, hoping to buy them back at a lower price to profit from the difference - struggled during the years-long bull market, when high valuations did not seem to matter.

That changed this year: Soaring inflation prompted a series of interest rate increases by the Federal Reserve, causing investors to flee once-popular growth and tech stocks.

Tesla is a prime example: The electric-car company was the most shorted stock in 2020 and 2021, but short sellers were sitting on about US$35 billion of paper losses by the end of 2020 and US$10 billion by the end of 2021, as the shares rallied.

The stock topped out late in 2021 at about 18 times sales, and it has lost half its value this year, when it was again the most shorted stock and the most profitable one for the bears.

Another favourite of the shorts, used-car retailer Carvana Co, has tumbled 98% this year. Short sellers have US$4.3 billion in mark-to-market profits on bets against the stock, according to S3.

Representatives of Apple and Carvana did not have any immediate comment on the short interest in their shares, while Microsoft declined to comment. Tesla, Meta, and Amazon were not immediately available to comment.

Many of the most-shorted stocks also were among the most-owned stocks by individual investors, meaning the mom-and-pop set took a big hit in the bear market.

Investment portfolios belonging to retail traders suffered a US$350 billion blow this year, according to data compiled by Vanda Research. The list is topped by Tesla, which accounts for about 10% of the average self-directed global retail trader's portfolio, according to the firm.

Even after this year's sell-off, the Nasdaq 100 trades at 21 times forward earnings, slightly above its 10-year average.

It is likely "that investors will make money shorting tech again in 2023", said Matt Maley, chief market strategist at Miller Tabak + Co. "History tells us that bear markets for the tech group do not end until the biggest names become at least somewhat cheap."

This year’s selloff has pushed Tesla’s valuation to the lowest ever in its 13 years as a publicly traded company. Tesla’s stock is down 52% this year, trading at 30 times projected earnings. Yet skeptics say the valuation may not be low enough, given that the electric-car maker is grappling with slowing in sales in China, the world’s largest car market, at a time when Chief Executive Officer Elon Musk is spending much of his time working on his new acquisition, Twitter Inc.

  - Bloomberg