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How the Big-Short Players Profited from the 2022-2023 Tech Stock Crash

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  //stocks-investing.news-articles.net/content/202 .. rofited-from-the-2022-2023-tech-stock-crash.html
  Published in Stocks and Investing on Sunday, November 16th 2025 at 7:52 GMT by This is Money

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The Big‑Short Play on Tech Stocks: How Some Investors Made a Fortune While the Market Crashed

When the global equity markets slipped into a sharp decline in late 2022 and early 2023, headlines were dominated by the fall of the Nasdaq, the sell‑off in high‑growth technology names and the widening wedge between growth and value. Amid that turbulence, a small but influential group of investors—often dubbed the “Big Short” cohort—found themselves riding a different wave. The article from This Is Money titled “Big Short tech stocks profit market meltdowns” dissects how these contrarian players capitalised on the downturn, the mechanics of their bets, and what the drama means for the wider investor community.

1. Market Backdrop: A “Tech‑Heavy” Crash

The article opens by framing the recent market downturn as an anomaly within the long‑term bull market that had carried the United States and Europe through the 2010s. In 2022, the S&P 500 was pushed lower by a combination of rising interest rates, inflationary pressure, and a sudden reassessment of the tech sector’s valuation multiples. The Nasdaq 100, the flagship index of U.S. technology stocks, fell by more than 30 % from its 2021 peak, an outsized decline relative to the broader market.

This Is Money points out that while the broader market fell by around 14 % in 2022, tech stocks were the most heavily weighted, accounting for roughly 35 % of the index by market‑cap. The article notes that the rapid de‑leveraging of high‑growth firms, combined with a shift in investor sentiment toward “quality‑value” stocks, set the stage for a classic “big short” opportunity.

2. The “Big Short” Narrative: From the 2008 Financial Crisis to 2023

The piece draws a parallel to Michael Lewis’s book and the subsequent film The Big Short, where a handful of investors bet against the sub‑prime mortgage market and reaped huge returns. In 2023, a new cohort of traders—often institutional hedge funds, proprietary trading desks and even individual investors with sophisticated derivatives portfolios—looked for similar profit avenues in the tech sector.

A central mechanism is short selling: borrowing shares of a company and selling them at the current price, with the obligation to buy them back later. If the price falls, the trader profits the difference. The article explains that short sellers typically use a variety of instruments, from direct short positions in shares to short‑covered exchange‑traded funds (ETFs), such as the ProShares Short QQQ (PSQ) that tracks the inverse of the Nasdaq 100.

The author cites a few high‑profile shorting moves that made headlines in 2023, including:

• Apple (AAPL) – Despite its strong fundamentals, a short covering spike was triggered by a 5 % decline in the company’s share price after a delayed earnings report. The shorting team in the article used options spreads to hedge the position.
• Microsoft (MSFT) – A well‑timed short on Microsoft’s cloud business that was deemed over‑valued amid a cost‑pressure wave.
• Amazon (AMZN) – A short bet that was profitable as the e‑commerce giant’s retail margins contracted.

The article stresses that while these individual bets were significant, the real profitability came from a basket approach. By shorting a diversified set of technology names, the short sellers spread the risk and capitalised on the systematic undervaluation of the sector.

3. How the Profits Were Realised

The This Is Money article uses a concrete example to illustrate the mechanics: a hypothetical hedge fund that entered a short position in the Invesco QQQ Trust (QQQ) at $350 per share in November 2022 and closed it at $280 in March 2023. This move yielded a 20 % gross return, before fees, on a notional $10 million position.

More detailed breakdowns in the article highlight the following points:

1. Interest and Financing Costs – Short selling involves borrowing the shares, which carries a financing cost. The article notes that while the interest rate on the borrowed shares is low, the high‑frequency nature of the trades (buy‑in, sell‑out within weeks) keeps the financing expense modest relative to the upside.
2. Volatility‑Adjusted Positioning – The short sellers used volatility‑based risk metrics, scaling the short size to the underlying beta of each stock. In a period of market-wide volatility, beta becomes a key driver of the cost of the short.
3. Event‑Driven Timing – Earnings releases, product launches, and regulatory announcements are key catalysts. The article documents how the fund’s short in Netflix’s shares captured a 6 % dip after a disappointing subscriber growth report.

A key piece of insight is that the profits were amplified by leverage. Many shorting strategies employ 2× or 3× leveraged short ETFs, magnifying the impact of a price decline. The article warns that while leverage can boost returns, it can also exacerbate losses if the market moves against the position.

4. Counter‑Moves and Market Dynamics

The article does not shy away from the counter‑risk. It explains that a short squeeze—where a heavily shorted security rallies and short sellers must cover—can rapidly erode gains. It cites the 2021 “GameStop” frenzy as a cautionary tale. In 2023, the article notes a modest short squeeze on certain small‑cap tech names, where retail investors and “short‑cover” momentum pushed prices up 4–5 % before the shorting funds closed their positions at a smaller loss.

In addition, the piece highlights the importance of sector rotation. As the market moved away from growth to value, many tech names that had been on the “sell‑off” list were later revisited by value‑oriented investors. Short sellers had to anticipate such reversals and adjust their exposure accordingly.

5. Investor Takeaways and the “Big‑Short” Mindset

Beyond the mechanics, the article offers actionable insights for retail investors:

• Diversification Matters – A diversified short basket mitigates company‑specific risk, but still benefits from a systematic sector decline.
• Leverage Requires Discipline – Leveraged short ETFs can produce outsized returns, but require a strict stop‑loss strategy to contain downside.
• Look for Mis‑Pricing – The article recommends monitoring valuations such as the price‑to‑earnings (P/E) ratio, the price‑to‑sales (P/S) multiple and the price‑to‑book (P/B) ratio in technology stocks relative to the broader market. A P/E multiple well above 30 often signals over‑valuation in a growth‑focussed market.
• Fundamental vs. Technical – While fundamentals (e.g., revenue growth, gross margin) are critical, technical signals—such as a sustained break below a 20‑day moving average—can trigger short positions.

The article’s tone is cautionary yet optimistic: short selling, when executed with disciplined risk management, can serve as a hedge against a broader market downturn, and may even turn profitable for those who can spot and act on mis‑pricing.

6. Further Reading and Context

The This Is Money piece links to several supplementary sources that enrich the narrative:

• A Bloomberg story that profiles one of the hedge funds that made the most on the tech short. It delves into the internal risk‑management framework of the fund and its use of derivatives.
• A Wall Street Journal article that explores the “short squeeze” phenomenon in the tech sector during 2023, offering a historical comparison to the 2015 “S&P 500 short squeeze.”
• A CNBC feature that discusses the regulatory environment surrounding short selling, including recent proposals to limit the use of naked short positions.

These links provide readers with deeper context on the regulatory backdrop, the technical intricacies of shorting strategies, and the broader narrative of market cycles.

7. Conclusion: Shorting Tech in a New Era

In a nutshell, the This Is Money article delivers a comprehensive, data‑driven look at how a small but potent group of investors capitalised on the tech‑heavy market downturn of 2022–2023. By shorting a diversified basket of high‑valuation technology names—leveraged where appropriate—these traders were able to generate profits that outpaced the broader market’s decline.

What emerges from the article is a broader lesson: the “Big Short” concept is no longer a relic of the 2008 financial crisis. With the advent of sophisticated derivatives, real‑time data analytics, and a more nuanced understanding of market psychology, short selling has become a viable strategy for both institutional and sophisticated retail investors. Yet, as the article reminds us, shorting is a high‑stakes play that demands rigorous risk management, an eye for valuation mis‑pricing, and a tolerance for volatility.

For anyone looking to understand the mechanics of short selling in a tech‑dominant environment—or simply curious about how investors can profit from a falling market—the article provides a clear, actionable, and well‑referenced primer.