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Heading into 2026, Applied Digital (APLD) finds itself in bad company: it was among the most shorted stocks in the tech sector in December. High short interest is usually a sign that traders believe something is fundamentally wrong with the company or the industry it operates in. For Applied Digital, this development is particularly surprising, as the company seems to be doing a good job of carving out its place in the industry, which itself is expected to continue growing in the near term.
Despite the above, APLD stock has gained 42% year-to-date (YTD). This is because short interest can act as a double-edged sword. The process of borrowing and then selling shares in the market brings the price down. But if a stock keeps going up for some reason, the same traders have to buy back these shares from the market. This generates upward stock price momentum that can then skyrocket if the majority of the traders rush in to close their positions.
