Short Sellers Wait as Markets Teeter on Correction Edge

 alex.trader24
 
  alex.trader24
 
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Chief Market Analyst with over 15 years experience with candid commentary and focuses on daily market analysis and financial research writing
 

•  21 Nov 2025
 

•   HOOD  
   
  +1.80%
•   NVDA  
   
  -1.01%
•   PLTR  
   
  -0.58%
•   QBTS  
   
  -0.49%
•   RDDT  
   
  +0.88%

Even Nvidia could not save the market this week. Think about that for a moment. The company that has become Wall Street unofficial stress test for the entire AI trade reported earnings that beat expectations, and still the market closed down sharply. When the one stock everyone is watching cannot hold the line, you know something deeper is stirring beneath the surface.

Wall Street spent last week looking like it was approaching a cliff edge. The media certainly seemed convinced a real crisis was brewing. Stocks fell everywhere in the US, Japan, South Korea, Europe. The S&P 500, Dow Jones, and Nasdaq were all signaling what could become the longest losing streak since August. At JPMorgan, analysts described the market as suffering from "collective heartburn" with $NVDA becoming the unofficial stress test for all AI trading, and suddenly the tech sector started blinking hard. Trading that used to feel unstoppable now feels panicked, they said.

The Fed is not helping calm anyone nerves either. We are still waiting on delayed economic data, including the September jobs report that should have been released weeks ago. Any hint of trouble could weaken the case for the December rate cut that experts have been counting on. Jerome Powell has already cast doubt on that cut, saying it is far from guaranteed, and Boston Fed President Susan Collins echoed that warning. Once again, fears are mounting that AI stocks like $NVDA are overvalued and that we are watching an investment bubble inflate in real time.

Here is the thing though: a correction is not the same as a crisis. The comparison to 2000, 2008, or even 2020 just does not fit what we are seeing now. All the fundamental reasons that create a bull market are still in place, except for one glaring problem: asset valuations have spiraled out of control precisely because those bullish conditions exist. The market needs a reality check on prices, not a complete reset.

That is where short sellers come in, and they are positioning themselves for what could be the catalyst that finally triggers this long-awaited correction. For over 200 years, investors have used short selling as an alternative strategy, yet somehow it is still labeled as "speculative" or even predatory. The truth is more nuanced. Professional short sellers, the ones operating with real strategy and economic logic, actually serve a crucial function. They restore sanity to overheated markets. They are the ones asking uncomfortable questions when everyone else is too caught up in the euphoria to notice the fundamentals do not match the price tags.

The problem is not professional shorts. It is the explosion of day traders who have flooded into short positions without any coherent strategy behind them. These retail players, enabled by platforms like $HOOD and communities like those on $RDDT, trade on momentum and hype rather than analysis. They do not care about valuation levels, and ironically, they end up hurting the professional short sellers who are trying to bring discipline to the market. Without these day traders cluttering the picture, strategic short selling would do its job beautifully and help calm volatility rather than amplify it.

Take Andrew Left of Citron Research, one of the most well-known short sellers out there. He recently went short on three hot tech names: $PLTR, $RGTI, and $QBTS. Let's focus on Rigetti Computing for a second. Left actually recommended $RGTI years ago when it traded at 90 cents as a speculative play. But after a recent meeting with management, he's now concerned about their quantum technology, their R&D spending, and the brutal competition they face from tech giants like Alphabet. Rigetti has surged over 3,000% in the past year and now trades at more than $8 billion in market cap with just $7.4 million in sales and a $351 million loss. Without shorts like Left applying pressure, this stock would be trading even higher, completely detached from any reasonable valuation metrics.

That is the value short sellers bring. When quantum computing stocks, $PLTR or even $NVDA itself start trading at levels that completely ignore basic economic variables, someone needs to step in and ask whether the emperor is actually wearing any clothes.

But amid all this market turbulence and overvaluation concerns, there is an interesting opportunity that is flying under the radar. While everyone is watching the high-flyers potentially crash back to earth, some quality companies have already taken the beating and might be worth a closer look.

Enter $RSKD, the Israeli company behind an online risk management platform for e-commerce. Riskified went public in late July 2021 and it has been a brutal ride since then, down 86.5% from its IPO price. The stock that opened at $27 and hit $34.90 on its first day now trades around $4.73 with a market cap of $727 million. The company, founded by Ido Gal and Assaf Feldman in 2013, focuses on solving online payment fraud, a problem that is only getting more critical as e-commerce continues expanding.

What caught attention this week was Zacks, a highly respected firm in company evaluation, giving Riskified a buy rating based purely on the changing earnings picture. Zacks does not follow Wall Street analyst upgrades that can be driven by subjective factors. Instead, they track consensus earnings per share estimates for the current and next year, which makes their system particularly useful for individual investors trying to cut through the noise. The upgrade to $RSKD essentially reflects a positive note on the earnings outlook, which could drive the stock higher.

The fraud prevention and risk management industry for e-commerce is dynamic and growing. It combines AI and machine learning with robust processes like secure payment gateways, multi-factor authentication, and real-time transaction monitoring to identify and block malicious activity before it causes damage. As online transactions multiply and fraud tactics evolve, this sector importance only increases.

Riskified beat expectations in the most recent quarter with earnings per share of $0.04 versus the expected $0.03, and revenue of $81.86 million versus $80.25 million expected. The company is still operating at a loss overall, but the trajectory is improving. Wall Street Zen recently upgraded the stock from "hold" to "buy," though analysts remain divided with three saying buy, three saying hold, two saying sell, with a consensus hold rating and an average price target of $5.89.

The competition in this space is real. Companies like Signifyd, Forter, Sift, and broader risk solution providers like NICE and LexisNexis are all fighting for market share. But that's exactly what makes the current valuation interesting. At $727 million market cap, $RSKD is trading far below where it started, and if the earnings momentum continues building, the risk-reward setup here looks asymmetric in a good way.

Markets do not move in straight lines, and corrections are not catastrophes if you know where to look. While the shorts circle around overvalued names that have run too far too fast, beaten-down quality companies with improving fundamentals might just offer the type of opportunity that makes sense in any market environment. Whether you are watching for the correction to play out or hunting for value in unexpected places, staying focused on the fundamentals never goes out of style.

If $RSKD turnaround story resonates with your investment approach, it might be worth digging deeper into the quarterly trends and competitive positioning before the broader market catches on.

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