The stock with mostly US revenue has surged 25% recently, moving with the US Indices rather than FTSE-100. It has new AI partnerships with MSFT and CRM.

Short interest has increased four-fold this year; with the stock continuing to rally, bears may be forced to cover, potentially triggering a rapid price squeeze.

While strong Q1 earnings are driving gains, skeptics worry about high valuations and the potential for free AI tools to disrupt Pearson's paid subscription model.

Pearson (PSON LN) has recently surged 25% off its lows and is now up 5% for the year. Pearson is a global education and assessment powerhouse providing learning materials, digital technologies, and testing services across five business units.

Interestingly, the stock has displayed almost no correlation to the FTSE-100 this year; instead, it’s acting like a Silicon Valley native, correlating to the SPX and NDX given that 70% of its revenue is U.S.-based.

The recent move up effectively mimics the SPX/NDX trajectory. Pearson has rebranded its online business as an AI play, leveraging high-profile partnerships with MSFT and CRM.

The stock is climbing on the back of Q1 earnings that delivered actual sales growth and optimistic full-year guidance. However, like many AI-adjacent stocks, bearish investors are concerned about the valuation, worrying that subscription-based tools might eventually be replaced by free AI alternatives.

There has also been inconsistent performance in certain segments, reminding investors of Pearson's history of uneven results.

According to S3’s short interest analytics, the short interest is up fourfold year-to-date. The stock and the short interest have been correlated in a classic reversal strategy, with bears shorting on the way up.

With the stock rallying so aggressively, it is now flashing a high short squeeze score.

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