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10 Worst Cloud Stocks To Buy According to Short Sellers

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In this article, we will take a look at the 10 Worst Cloud Stocks To Buy According to Short Sellers.

Cloud computing refers to the use of remote servers, typically accessed via the Internet, to store, manage, and process data. A segment of the broader IT services industry, the cloud computing market was valued at $480 billion in 2022, and despite its size, it is projected to grow at a compound annual growth rate (CAGR) of 17%, reaching an estimated $2.2 trillion by 2032 (according to estimates from Precedence Research). Knowing this, it’s no surprise that many of the hottest tech stocks from 2019 to 2021 were tied to cloud computing, with ETFs like the First Trust Cloud Computing ETF surging 71.84% over the past five years.

The largest cloud computing segment is Software as a Service (SaaS), which generates the most revenue in the cloud market and has become the standard for delivering enterprise applications. Common uses of SaaS include customer relationship management, analytics, and artificial intelligence software. The next layer, Platform as a Service (PaaS), provides customers with a platform for application development. Lastly, Infrastructure as a Service (IaaS) offers customers off-site resources such as storage, servers, virtual machines, and networking.

Amid the disruption and excitement surrounding generative AI (GenAI), cloud service providers (CSPs) enable businesses to engage with customers and operate innovatively. With AI Ops and AI tools offered by CSPs, businesses can transform proof-of-concept ideas into production-ready solutions, delivering personalized recommendations, optimizing supply chains, and enhancing customer experiences. Following the launch of OpenAI’s ChatGPT, cloud providers have started utilizing these advancements to unlock new opportunities. Moreover, Tim Potter, a principal at Deloitte Consulting, made the following remarks regarding the relationship between AI and the cloud:

“AI is accelerating the adoption of cloud computing while enabling cloud providers to enhance platform solutions and services. Most AI solutions are either services offered directly by hyperscalers or solutions built on top of a hyperscaler’s cloud infrastructure.”

Another major driver of the cloud industry’s growth is the increasing recognition by large enterprises of its impact on their operations. According to a report by the Cloud Security Alliance, 94% of companies worldwide have already adopted cloud computing solutions this past year. This widespread adoption is projected to have a significant economic impact, with estimates suggesting it could generate around $3 trillion in revenue by 2030.

Although the Magnificent Seven stocks have been in the spotlight since the surge in artificial intelligence excitement, Apple Inc. has recently been making notable advancements in the AI space. Earlier this year, the iPhone-maker unveiled its new artificial intelligence initiative which is set to elevate the cloud to new levels of consumer exposure, with the tech giant moving toward offering on-device AI through a partnership with OpenAI’s ChatGPT platform.

Our Methodology

To compile our list of the 10 worst cloud stocks to buy according to short sellers, we first compiled a list of 20 cloud stocks by sifting through ETFs and online rankings. Then we checked their short interest and selected the 10 with the highest short interest. Finally, we ranked the stocks in ascending order of their short interest. We have also included the hedge fund sentiment for each stock, as of Q2 2024.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

10. Informatica Inc. (NYSE:INFA)

Short % of float: 2.33%

Number of Hedge Fund Holders: 28

Informatica Inc. (NYSE:INFA) is a software company that provides tools and solutions to help businesses integrate, manage, and govern their data, enabling better decision-making and deeper insights. The company has also made significant advancements in cloud data management, especially with its Informatica Data Management Cloud (IDMC) and PowerCenter Cloud Edition.

Although targeted by short sellers, the company recently gained attention for its strong financial performance and strategic initiatives. It reported a 35% year-over-year increase in cloud subscription Annual Recurring Revenue (ARR), reaching $653 million, which contributed to a total ARR of $1.64 billion, a 7% year-over-year growth. Moreover, total revenue grew by 6% to $389 million, while non-GAAP operating income surged 29% year-over-year to $109 million.

In addition, RBC Capital Markets reaffirmed its Outperform rating on Informatica Inc. (NYSE:INFA), underscoring the firm’s optimism after attending Informatica World, and highlighting the company’s balanced risk and reward potential for investors.

As of Q2 2024, 28 hedge funds held positions in Informatica Inc. (NYSE:INFA), with Jericho Capital Asset Management emerging as the largest shareholder, holding a stake valued at $67.46 million.

9. Gitlab Inc. (NASDAQ:GTLB)

Short % of float: 3.45%

Number of Hedge Fund Holders: 39

GitLab Inc. (NASDAQ:GTLB) is a web-based SaaS platform offering free open and private repositories, issue tracking, and wikis. As a comprehensive DevOps solution, it supports the entire project lifecycle—from planning and source code management to monitoring and security. Moreover, GitLab Inc. (NASDAQ:GTLB) integrates Google Cloud’s generative AI models to deliver AI-powered features across the SDLC with a privacy-first approach.

GitLab Inc. (NASDAQ:GTLB) recently received an upgraded price target from TD Cowen, now set at $63, up from $58, with a reiterated a Buy rating. This followed the company’s strong second quarter, which saw 31% revenue growth, surpassing the anticipated 27%. The company also raised its full-year revenue guidance to a 28% increase, up from 27%.

Notably, GitLab Inc. (NASDAQ:GTLB) reported a 42% growth in billings for Q2, the highest since Q1 2024, far exceeding analyst expectations. Additionally, the company was named a Leader in the 2024 Gartner Magic Quadrant for AI Code Assistants and retained its Leader status in the 2024 Magic Quadrant for DevOps Platforms.

As of Q2 2024, 39 hedge funds held a total of 5.07 million shares in the company, with HMI Capital owning the largest stake, valued at $252.4 million.

Baron Discovery Fund stated the following regarding GitLab Inc. (NASDAQ:GTLB) in its Q2 2024 investor letter:

“We are huge believers in the practical uses of AI, and we have several investments in companies that adapt AI models to enhance their products and services. These include companies like GitLab Inc. (NASDAQ:GTLB), SentinelOne, Inc., and Couchbase, Inc., which were among our top detractors at one point in the second quarter (GitLab and SentinelOne recovered significantly in the last week of the quarter). As of the second quarter at least, the market has just not been ready to reward AI companies beyond those providing “picks and shovels.” This led to all three of these companies trading at or near all-time low valuation levels during the quarter. Nevertheless, we believe that in the coming quarters the market will broaden its level of interest from AI hardware to “adaptive AI” investments like GitLab, SentinelOne, and Couchbase. In that scenario, all three of these stocks have significant upside potential.

GitLab is a subscription software company that enables enterprise software developers to develop new software applications rapidly and securely for their firms. GitLab uses AI to help with code suggestions, to check for holes in security, and to automate collaboration among the many developers within an enterprise. GitLab recently launched a product called Duo that we believe will provide revenue upside for the company and enhance the competitiveness of their product of offerings. SentinelOne is a cybersecurity company that provides endpoint protection (a much more advanced version of legacy “anti-virus” software) both at customers’ physical sites and in the cloud. It uses AI to detect anomalous behavior on the network and to automate the remediation of the security flaws that led to the intrusion. Both companies are recurring revenue entities, with high gross margins (78% for SentinelOne and 90% for GitLab) and are growing rapidly (revenue growth of 25% or more). Yet both are trading at or near all-time low valuation levels. GitLab shares dropped 14.7% in the quarter despite raising full-year revenue and earnings guidance. This was partly due to a health issue with the CEO (cancer recurrence which he believes is very treatable). We see GitLab revenues growing at a compounded rate of 26% through 2028 with free cash flow growing five-fold over current levels. Again, we see the stock doubling over this time.”

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AI, Tariffs, Nuclear Power: One Undervalued Stock Connects ALL the Dots (Before It Explodes!)

Artificial intelligence is the greatest investment opportunity of our lifetime. The time to invest in groundbreaking AI is now, and this stock is a steal!

AI is eating the world—and the machines behind it are ravenous.

Each ChatGPT query, each model update, each robotic breakthrough consumes massive amounts of energy. In fact, AI is already pushing global power grids to the brink.

Wall Street is pouring hundreds of billions into artificial intelligence—training smarter chatbots, automating industries, and building the digital future. But there’s one urgent question few are asking:

Where will all of that energy come from?

AI is the most electricity-hungry technology ever invented. Each data center powering large language models like ChatGPT consumes as much energy as a small city. And it’s about to get worse.

Even Sam Altman, the founder of OpenAI, issued a stark warning:

“The future of AI depends on an energy breakthrough.”

Elon Musk was even more blunt:

“AI will run out of electricity by next year.”

As the world chases faster, smarter machines, a hidden crisis is emerging behind the scenes. Power grids are strained. Electricity prices are rising. Utilities are scrambling to expand capacity.

And that’s where the real opportunity lies…

One little-known company—almost entirely overlooked by most AI investors—could be the ultimate backdoor play. It’s not a chipmaker. It’s not a cloud platform. But it might be the most important AI stock in the US owns critical energy infrastructure assets positioned to feed the coming AI energy spike.

As demand from AI data centers explodes, this company is gearing up to profit from the most valuable commodity in the digital age: electricity.

The “Toll Booth” Operator of the AI Energy Boom

  • It owns critical nuclear energy infrastructure assets, positioning it at the heart of America’s next-generation power strategy.
  • It’s one of the only global companies capable of executing large-scale, complex EPC (engineering, procurement, and construction) projects across oil, gas, renewable fuels, and industrial infrastructure.
  • It plays a pivotal role in U.S. LNG exportation—a sector about to explode under President Trump’s renewed “America First” energy doctrine.

Trump has made it clear: Europe and U.S. allies must buy American LNG.

And our company sits in the toll booth—collecting fees on every drop exported.

But that’s not all…

As Trump’s proposed tariffs push American manufacturers to bring their operations back home, this company will be first in line to rebuild, retrofit, and reengineer those facilities.

AI. Energy. Tariffs. Onshoring. This One Company Ties It All Together.

While the world is distracted by flashy AI tickers, a few smart investors are quietly scooping up shares of the one company powering it all from behind the scenes.

AI needs energy. Energy needs infrastructure.

And infrastructure needs a builder with experience, scale, and execution.

This company has its finger in every pie—and Wall Street is just starting to notice.

Wall Street is noticing this company also because it is quietly riding all of these tailwinds—without the sky-high valuation.

While most energy and utility firms are buried under mountains of debt and coughing up hefty interest payments just to appease bondholders…

This company is completely debt-free.

In fact, it’s sitting on a war chest of cash—equal to nearly one-third of its entire market cap.

It also owns a huge equity stake in another red-hot AI play, giving investors indirect exposure to multiple AI growth engines without paying a premium.

And here’s what the smart money has started whispering…

The Hedge Fund Secret That’s Starting to Leak Out

This stock is so off-the-radar, so absurdly undervalued, that some of the most secretive hedge fund managers in the world have begun pitching it at closed-door investment summits.

They’re sharing it quietly, away from the cameras, to rooms full of ultra-wealthy clients.

Why? Because excluding cash and investments, this company is trading at less than 7 times earnings.

And that’s for a business tied to:

  • The AI infrastructure supercycle
  • The onshoring boom driven by Trump-era tariffs
  • A surge in U.S. LNG exports
  • And a unique footprint in nuclear energy—the future of clean, reliable power

You simply won’t find another AI and energy stock this cheap… with this much upside.

This isn’t a hype stock. It’s not riding on hope.

It’s delivering real cash flows, owns critical infrastructure, and holds stakes in other major growth stories.

This is your chance to get in before the rockets take off!

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AI is the ultimate disruptor, and it’s shaking the foundations of traditional industries.

The companies that embrace AI will thrive, while the dinosaurs clinging to outdated methods will be left in the dust.

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A New Dawn is Coming to U.S. Stocks

I work for one of the largest independent financial publishers in the world – representing over 1 million people in 148 countries.

We’re independently funding today’s broadcast to address something on the mind of every investor in America right now…

Should I put my money in Artificial Intelligence?

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And is still used by hundreds of banks, hedge funds, and brokerages to track the billions of dollars flowing in and out of stocks each day.

He’s used this system to survive nine bear markets… create three new indices for the Nasdaq… and even predict the brutal bear market of 2022, 90 days in advance.

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