(Bloomberg) — Goldman Sachs Group Inc.’s trading desk said on Friday that its clients are growing “more comfortable” betting against shares of unprofitable technology companies, following a resurgence of meme stock mania that has sparked wild rallies in a cohort of smaller names.
After surging some 70% from its mid-April lows, the bank’s basket tracking unprofitable tech stocks has slipped over the last two days, giving back more than 3%.
“Nearly all of our client conversations this week are about when to take the other side of the moves in most speculative area of the market such as non-profitable tech stocks,” Faris Mourad, Goldman’s vice president of US custom baskets team wrote in a note to clients. “We have seen less talk and more action as the week has progressed and we are noticing clients getting comfortable shorting at these levels.”
The nascent shift comes as eye-popping rallies in shares of companies such as Kohl’s Corp., GoProInc. and Krispy Kreme Inc. once again capture Wall Street’s attention, with some market participants calling the moves a sign that speculative excess is building in equities.
Goldman Sachs’ so-called speculative trading indicator this week jumped to one of highest levels on record, while bullish call options on US stocks made up more than 61% of all option volumes, the biggest share since 2021. Recent retail trading in non-profitable stocks, meanwhile, has outpaced 2021’s meme frenzy.
As froth builds, trading desks at Goldman and Citadel Securities have urged clients to buy cheap hedges against potential losses in US stocks against a slew of potential risks. Among those are next week’s earnings from megacap heavyweights and President Donald Trump’s August 1 tariff deadline.
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