Tesla short sellers have lost $7 billion in 2023 as the EV maker's stock has soared 86%

• Tesla short sellers have lost $7.2 billion during 2023, according to data analytics firm S3 Partners.
• The EV maker's stock jumped 86% year-to-date amid a broader tech rally.

Investors betting against Tesla are feeling the pain as the electric vehicle maker's stock notches double-digit gains in 2023.

Short sellers have taken $7.2 billion in mark-to-market paper losses as of Thursday, according to data analytics firm S3 Partners, while the Tesla stock soared 86% since the start of the new year.

And 10 of the most-shorted stocks delivered nearly $17 billion in total losses this year, including Meta Platforms and Apple.

Tesla has been a long-time target for short sellers. The company was the most-shorted stock in 2022 as well, according to Bloomberg, citing S3 data, with the EV giant delivering $16 billion in gains for bears. Tesla stock plunged 65% last year, it's biggest annual decline.

But shares surged earlier this year amid a broader rally in the technology sector and rising demand for Tesla's products, though the stock market in recent days has cooled off significantly.

Short sellers could see their luck turnaround because the market rally won't last, Morgan Stanley's top strategist Mike Wilson said in a recent note to clients. US stocks have surged too high, and are now in a "death zone," he warned, forecasting that the S&P 500 will crash 26% within months.

The rally followed hopes that the Federal Reserve would soon pivot to rate cuts, but recent economic data has instead raised expectations that the central bank will keep borrowing costs higher for longer.