Tesla Inc. (TSLA, Financials), the electric car and energy firm, awarded short sellers billions of dollars in paper profits after its stock dropped following weaker-than-expected second-quarter earnings.
Shares of Tesla NASDAQ:TSLA sank 14.5% Thursday, its biggest one-day drop in more than a year, after investors questioned how soon they would see returns on the company's investments in artificial intelligence and robots.
Traders betting against the business pocketed approximately $4.3 billion in mark-to-market gains as a result of the selloff, according to data from S3 Partners.
Tesla is the most shorted stock among the Magnificent Seven, with nearly 3% of its shares sold short. Meta Platforms is second, with about 1.6%.
The fall also increased Tesla's year-to-date loss to over 29%, leaving short sellers with around $9.08 billion in unrealized gains for 2026.
Despite the selloff, Tesla remains the most expensive member of the group on a forward profits basis, selling at approximately 152 times anticipated profit.
The high valuation, weaker earnings and big bets on future technologies have raised questions about Tesla's growth prospects.
Investors will be watching to see if upcoming updates on robotaxis, robotics and AI can rebuild confidence and support the stock's premium valuation.