Panida Wijitpanya | Istock | Getty ImagesShort sellers are increasingly hunting for cracks beneath the stock market’s artificial-intelligence frenzy, betting that some of the speculative excesses, copycat “AI” branding and vulnerable legacy business models could eventually unravel.As billions of dollars flood into data centers, semiconductors and AI software, some short sellers argue the rally is beginning to resemble previous speculative manias, where weaker companies rushed to attach themselves to the hottest market theme in hopes of attracting capital and retail traders.”A rising tide lifts all boats, and a twisting tide takes down a lot of names in the same neighborhood,” Joyce Meng, founder of Fact Capital, said during a panel discussion at Sohn Investment Conference this week in New York. “Especially in the market where you have an AI frenzy, everyone trying to go jump into that, one of our favorite themes is fake AI.”Meng said she likes to run screens to identify companies that abruptly rebranded themselves to capitalize on the boom, including firms that suddenly changed their names to include the word “AI.”One target that Meng identified using the “AI name change” screen is Rezolve AI, which changed its name from Rezolve Group Limited in 2023. After digging deeper into the company, Meng said she saw multiple red flags around the business and predicted the stock to fall 60%.Meng also pointed to a Chinese landscaping company that later reinvented itself as an AI server business. During her firm’s research, she said the company appeared to have photoshopped products into marketing materials on its website and claimed to have hired employees listed on LinkedIn that turned out, according to Fact Capital’s checks, …
