A steep selloff is unfolding around AI infrastructure and data center stocks, reflecting growing investor concerns about the sustainability of the AI investment boom and elevated valuations. Major indices have already retraced from all-time highs as investors increasingly question capital expenditure requirements and whether earnings expectations are running too far ahead of actual returns.
The recent sell-off in AI infrastructure and data center stocks has raised concerns that the market’s enthusiasm for artificial intelligence has run too far. After a period of strong gains fueled by massive investments in AI chips, cloud computing and data centers, several stocks are facing renewed selling pressure. Check out the 5 Cheapest AI Data Center Stocks to Buy According to Billionaires.
The Global X Data Center & Digital Infrastructure ETF (DTCR) lost nearly 4% in a single day, compounding its losses over the past six months to over 18%. Likewise, the tech-heavy NASDAQ 100 lost nearly 6% in a single day, its steepest one-day decline in 19 months. The losses brought its year-to-date gain to just 5% after it initially powered to a record high of 30,800 amid heightened interest in AI plays.
While not all companies participating in the AI infrastructure boom have the balance sheets of tech giants, data center developers and neocloud operators often require substantial external financing to build infrastructure. Likewise, higher borrowing costs, rising debt levels, and uncertain future cash flows are making investors more cautious.
The November US midterm election results have become a major trigger for the AI stocks selloff as well. Democrats gaining control of both chambers of Congress raises concerns about increased scrutiny of data center development and AI infrastructure investment.
The election outcome triggered renewed concerns about potential restrictions on AI development and data-center construction. Democratic lawmakers have raised issues surrounding AI regulation, electricity consumption, and data-center expansion.
The downturn also raises questions about whether the sell-off is a temporary correction after an extraordinary rally or the start of a broader reassessment of AI-related valuations and growth expectations. Amid these concerns are the 10 Best Stocks to Buy for the Next 10 Years.
Our Methodology
To compile a list of the 10 worst AI infrastructure and data center stocks to buy now according to short sellers, we scanned the internet and exchange-traded funds. We compiled a list of the top AI infrastructure and data center companies and focused on stocks whose short interest, as a percentage of outstanding shares, is more than 5%. We then explained why the stocks are under pressure and how many hedge funds hold stakes in them. Finally, we ranked the stocks in ascending order based on short interest.
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. Insider Monkey’s quarterly newsletter strategy selects 14 small-cap and large-cap stocks every quarter and has returned 612% since May 2014, beating its benchmark by 375 percentage points (see more details here).
10. Western Digital Corp. (NASDAQ:WDC)
Short Interest as of October 30: 5.18%
Year-to-Date Gain as of November 12: 68.06%
Number of Hedge Fund Holders: 98
Western Digital Corp. (NASDAQ:WDC) is under significant pressure following a sharp selloff in AI infrastructure and storage stocks. The stock plunged by approximately 17.4% in a single day as investors reassessed the sustainability of data-center spending, future hard-drive pricing, and the company’s elevated valuation.
Western Digital Corp. has benefited from rising demand for high-capacity hard disk drives (HDDs) used in hyperscale data centers and cloud infrastructure. However, investors are increasingly concerned that the enormous capital spending required to build AI infrastructure may face regulatory and political obstacles.
While the company delivered a 55% increase in revenue to $4.38 billion, in the first quarter of fiscal 2027, cloud revenue accounted for 88% of total revenue at $3.9 billion. This makes it particularly vulnerable to any slowdown in hyperscaler spending or delays in new data center construction. Check out how Near-Term Weakness Diverges from Robust Cloud Demand.
The biggest concern is that much of Western Digital Corp.’s anticipated AI-driven growth may already be priced in. Before the selloff, the company traded at 22x forward P/E versus 10.3x for the industry.
Nevertheless, the selloff does not necessarily reflect a deterioration in Western Digital Corp.’s underlying business. Revenue in fiscal fourth quarter 2026 was up 44% to $3.75 billion, with gross margin at 54.4%.
9. Super Micro Computer Inc. (NASDAQ:SMCI)
Short Interest as of October 30: 11.38%
Year-to-Date Gain as of November 12: -6.64%
Number of Hedge Fund Holders: 62
Super Micro Computer Inc. (NASDAQ:SMCI) has come under pressure amid growing concerns about AI server profitability and execution risks. Although demand for AI infrastructure remains strong, investors are increasingly questioning whether Super Micro can convert its rapid revenue growth into sustainable earnings and cash flow.
The stock has shed more than 30% in market value over the past month amid growing uncertainty about long-term growth prospects. While the company is benefiting from strong demand for AI servers and data center infrastructure, its exposure to the rapidly expanding AI market does not necessarily translate into sustainable shareholder returns.
Super Micro Computer Inc. reported impressive first-quarter fiscal 2027 results, with revenue surging 298% to $19.95 billion and adjusted EPS of $1.81. However, the company’s gross margins thinned further to 12.7% from 17.5% in the preceding quarter. The problem is that large AI server deployments generate substantial revenue but can carry lower margins than traditional enterprise server products.
Customer concentration is also becoming a problem as one customer accounted for approximately 44% of SMCI’s first-quarter revenue, compared with 28% for the entire previous fiscal year. Even with strong AI demand, investors may be uncomfortable with this level of dependence. Check out how the company won over $60B in orders.
Although management raised the fiscal 2027 revenue forecast to $72 billion– $82 billion, investors must weigh the company’s impressive growth prospects against thin margins and customer concentration. These challenges could make Super Micro Computer Inc. a relatively risky choice among AI infrastructure and data center stocks, particularly for investors prioritizing consistent profitability and predictable cash generation.
8. CoreWeave, Inc. (NASDAQ:CRWV)
Short Interest as of October 30: 13.46%
Year-to-Date Gain as of November 12: -31.63%
Number of Hedge Fund Holders: 71
CoreWeave, Inc. (NASDAQ:CRWV) has seen its sentiment and outlook turn sour amid mounting concerns over its debt-fueled expansion and rising financing costs. The stock has already shed more than 30% of its market value year to date, with short interest of 13.46%, suggesting strong bearish positioning.
The underperformance comes amid growing concerns that the company’s aggressive expansion requires enormous capital investments, increasing its dependence on external financing.
In the third quarter of 2026, CoreWeave, Inc. generated $3.66 billion in revenue, more than double the $1.365 billion reported a year earlier. However, its net loss widened to $709million from $110 million, while net interest expense surged to $846 million from $310 million. The company also reported approximately $132.5 billion in revenue backlog, highlighting strong customer demand but not guaranteeing immediate cash generation.
The company’s capital-intensive business model presents another significant concern. CoreWeave spent $14.1 billion on property and equipment during the first half of 2026, compared with $3.9 billion in the same period last year.
Nevertheless, CoreWeave, Inc. could present an attractive buying opportunity for investors who believe that demand for AI computing infrastructure will continue growing. That’s because business continues to expand despite the deteriorating sentiment toward AI infrastructure stocks. Revenue has more than doubled in the past three quarters, and the company had a backlog of $104 billion as of June. Can the backlog offer long-term support?
Additionally, the 40% sell-off has significantly reduced the premium investors were paying for the stock. Is the pullback a buy opportunity?
7. Innodata Inc. (NASDAQ:INOD)
Short Interest as of October 30: 14.73%
Year-to-Date Gain as of November 12: -30.14%
Number of Hedge Fund Holders: 25
Innodata Inc. (NASDAQ:INOD) is under immense selling pressure amid concerns about customer concentration and the sustainability of its AI-driven revenue growth. The stock is down about 30% for the year, with short interest of 14.73%, even as the company reports strong financial results.
The biggest concern is that Innodata Inc. is not a direct AI infrastructure or data center investment. Rather, it operates in the AI services and data-engineering segment, making it more exposed to changes in customer spending priorities.
One of the biggest reasons behind the selloff is the reported reduction in business assignments from a major customer. During its Q3 earnings call, management disclosed that the termination of the customer program is expected to create an approximately $12 million revenue shortfall in Q4 2026. This creates a risk that revenue growth could temporarily slow before new customer assignments begin contributing meaningfully.
Additionally, the company’s business depends heavily on a relatively small number of large AI customers. This exposes the company to fluctuations in project volumes, contract renewals, and changes in spending priorities among major technology companies. Is Innodata one of the best small-cap stocks to buy?
Innodata Inc.’s selloff doesn’t necessarily reflect collapsing AI demand. Rather, investors are reassessing the company’s customer concentration, project-based revenue model, operating expenses, and ability to sustain rapid growth amid weakness around AI infrastructure and data center stocks.
6. Hut 8 Corp. (NASDAQ:HUT)
Short Interest as of October 30: 16.39%
Year-to-Date Gain as of November 12: 22.82%
Number of Hedge Fund Holders: 73
Hut 8 Corp. (NASDAQ:HUT) is under significant pressure heading into year-end following a disappointing third-quarter 2026 earnings report and growing investor concerns about the profitability and execution of its AI data center expansion. The stock has shed more than 50% in market value over the past six months, with short interest of 16.39% amid weakness across AI infrastructure and data center stocks.
The selloff comes as the company repositions itself as a major AI and high-performance computing (HPC) infrastructure provider. Although it has secured substantial long-term AI data center contracts, investors appear increasingly concerned about the time, capital, and execution risks involved in turning those commitments into sustainable earnings. Is Hut8 benefiting from $35B Anthropic deal?
Hut 8 Corp. reported approximately 7,859 MW of energy capacity across its development pipeline, including 1,330 MW under construction in the third quarter. Its AI data center portfolio now has approximately $26.6 billion in expected aggregate base-term contract value.
Hut 8 Corp.’s AI data center ambitions require substantial capital investment. As of September 30, it had approximately $7.4 billion in non-current loans, notes payable, and other financial liabilities. It also secured a new $1.07 billion revolving credit facility to support its expansion. Although project-level financing reduces some pressure on the parent company, the scale of its financial commitments exposes it to interest costs, construction delays, and refinancing risk.
5. Cipher Digital Inc. (NASDAQ:CIFR)
Short Interest as of October 30: 18.49%
Year-to-Date Gain as of November 12: -54.38%
Number of Hedge Fund Holders: 72
Cipher Digital Inc. (NASDAQ:CIFR) stands out as one of the worst AI infrastructure and data center stocks to buy according to short sellers, because of its aggressive capital requirements and exposure to the highly competitive AI data center market. The stock has lost more than 50% in market value, and short interest of 18.49% as the company transitions from cryptocurrency mining toward high-performance computing (HPC) and AI infrastructure,
The transition has come at a cost as it requires substantial investment in data center construction, power infrastructure, and specialized computing capacity. These projects could weigh on cash flow, increase financing requirements, and expose shareholders to dilution if additional capital is needed.
Its September balance sheet showed approximately $5.45 billion in long-term borrowings, up from $2.71 billion at the end of 2025. Short-term borrowings added another $112.7 million. Although some financing is tied to specific data center projects, the growing debt burden increases financial risk if construction schedules slip or expected cash flows fail to materialize.
While Cipher Digital Inc. reported third-quarter 2026 revenue of approximately $27 million and negative adjusted EBITDA of $10 million, these figures remain relatively small compared with the scale of its infrastructure investments. Explore why Morgan Stanley is optimistic about Cipher.
Nevertheless, Cipher Digital Inc. still has growth opportunities. It has already revealed that its expanded Barber Lake lease has increased contracted revenue to approximately $9.1 billion over 20 years. It also boasts of major customers, including Amazon Web Services, and a development pipeline of approximately 5.9 GW.
4. Nebius Group N.V. (NASDAQ:NBIS)
Short Interest as of October 30: 18.74%
Number of Hedge Fund Holders: 86
Nebius Group N.V. (NASDAQ:NBIS) is under significant market pressure as investors reassess risks in the rapidly expanding AI infrastructure industry. The stock has shed more than 30% in market value over the past month. Short interest around the stock stands at 18.74%, signaling growing bearish positioning.
Nebius Group N.V. has been under pressure as it pursues an extremely capital-intensive expansion strategy. It raised its 2026 capital expenditure forecast to about $27 billion as it accelerated AI data center construction and expanded its GPU infrastructure. Explore Palantir partnership potential impact.
Heavy reliance on borrowing and external capital could increase interest expenses, financial risk, and potential shareholder dilution. It secured a $3.5 billion senior secured financing facility from Citi to support its data center expansion and GPU procurement. Although the financing provides additional liquidity, it also increases the company’s financial obligations.
However, the stock remains an attractive long-term investment because its underlying growth opportunity is still substantial. Second-quarter results showed strong demand for Nebius Group N.V.’s products, with revenue surging 454% to $582 million as AI cloud-adjusted EBITDA reached 50%. This rapid growth suggests Nebius is benefiting from real customer demand rather than relying solely on speculative expectations around artificial intelligence.
3. Applied Digital Corporation (NASDAQ:APLD)
Short Interest as of October 30: 20.32%
Year-to-Date Gain as of November 12: -37.92%
Number of Hedge Fund Holders: 59
Applied Digital Corporation (NASDAQ:APLD) has emerged as a high-risk investment in the AI infrastructure and data center sector, despite benefiting from growing demand for computing capacity. The stock has shed more than 30% of its market value, underperforming the broader market and the Insider Monkey Billionaire index, which has gained 25%.
Amid the underperformance, the company has invested heavily in developing high-performance data centers designed to support artificial intelligence (AI) and high-performance computing (HPC) workloads. However, its substantial capital requirements and exposure to a highly competitive market make the stock a potentially risky choice.
One of the biggest concerns surrounding Applied Digital Corporation is its heavy reliance on external financing to fund its ambitious expansion plans. As of August 31, the company had $3.7 billion in cash, cash equivalents, and restricted cash against $6.4 billion in debt.
Amid the high debt levels, the stock has attracted substantial short interest at 20.32% of outstanding shares, suggesting investors are betting against the company. Why are insiders still buying Applied Digital?
Nevertheless, it has secured substantial long-term data center contracts that affirm its long-term outlook. Applied Digital Corporation has already secured approximately 1.41 gigawatts of contracted critical IT capacity across five data center campuses. Its largest agreement is with AI cloud provider CoreWeave, along with investment-grade hyperscalers at Polaris Forge 2, Polaris Forge 3, Delta Forge 1, and Delta Forge 2.
2. IREN Limited (NASDAQ:IREN)
Short Interest as of October 30: 22.31%
Year-to-Date Gain as of November 12: -52.99%
Number of Hedge Fund Holders: 69
IREN Limited (NASDAQ:IREN) is a major player in the AI infrastructure market, but its ambitious expansion plans come with significant financial and execution risks. The company’s transition from Bitcoin mining toward high-performance computing (HPC) and AI cloud services has come with its fair share of risks. The stock has already shed more than 50% of its market value as it remains under pressure amid a broader sector selloff.
The selloff comes amid concerns that the company’s aggressive spending on HPC and AI cloud services could outpace revenue growth, even as it faces a considerable AI infrastructure opportunity. The risks have become more apparent as it delivered a first-quarter fiscal 2027 net loss of $263 million despite revenue increasing 66% sequentially to $228 million.
AI Cloud revenue surged 182% to $200 million. Still, IREN Limited also disclosed that its target of achieving more than $4 billion in annualized run-rate revenue had shifted from year-end 2026 to January 2027. Can Microsoft’s pact accelerate growth?
IREN plans approximately $15 billion in capital expenditure over the remainder of its fiscal year, while its capital commitments reached $18.95 billion at the end of September. Such spending leaves the company heavily dependent on financing markets, customer payments, and successful infrastructure deployment.
While IREN Limited may be a risky AI infrastructure stock to buy at this stage, its rapidly growing AI Cloud business and multibillion-dollar contracts offer considerable long-term potential.
1. TeraWulf Inc. (NASDAQ:WULF)
Short Interest as of October 30: 24.34%
Year-to-Date Gain as of November 12: 5.20%
Number of Hedge Fund Holders: 88
TeraWulf Inc. (NASDAQ:WULF) is under significant pressure due to weakness in the AI infrastructure sector and rising concerns about data center financing costs. While the stock is still up for the year it has lost nearly 40% in market value over the past six months, and short interest has surged to 24.34%, implying significant bearish positioning. Here’s why the stock is retreating.
TeraWulf Inc. has been shifting away from traditional Bitcoin mining toward higher-margin HPC and AI infrastructure leasing. However, this transition requires substantial investment, while new data center capacity takes time to become operational and generate revenue.
Despite the company securing major long-term AI hosting agreements backed by Google, investors are increasingly concerned about the substantial capital required to deliver these projects and when they will translate into sustainable profits.
TeraWulf Inc. estimates development costs of approximately $4 billion to $4.5 billion for its Hawesville, Kentucky campus and initial data halls. On November 4, it announced credit support agreements with Google relating to approximately $19 billion in contracted lease commitments.
Nevertheless, financial performance continues to improve. Third quarter revenue increased to $76.23 million from $50.57 million the same quarter last year. The company also reported a net income of $709.9 million compared to a loss of $455.01 million a year ago in the same quarter.
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