Looking at the AI-related broad universe, we find three primary categories: mega-cap companies with AI exposure (such as the Mag7), pure-play AI stocks, and quantum computing equities.

Year to Date,using equally weighted baskets across our lists, the Mag7 AI-exposed stocks have gained 22%, pure-play AI stocks are up 33%, and quantum computing equities have surged by 135%—showing their speculative nature.

From a volatility perspective, a similar pattern emerges: Mag7 stocks exhibit 30% volatility, pure-play AI stocks at 68%, and quantum computing stocks at a high 92%.

Another key observation is a notable 40% decline in volatility in all groups when comparing the past month to the previous year—highlighting compression across the sector.

On a risk-adjusted return basis, quantum stocks lead, followed by AI-exposed mega-caps, then pure-play AI, although they are similar, meaning risk and return are mostly proportional.

Looking at short interest analytics, short interest in pure-play AI stocks rose 30%, while levels in AI-exposed and quantum computing stocks remained largely flat.

However, a deeper look into each group reveals a pattern: stocks with stronger performance typically show falling short interest % of float, suggesting short covering and momentum-driven gains. Underperformers, by contrast, exhibit rising short interest.

The accompanying graph differentiates the three groups. While orange and green (quantum and AI exposed) data points are near zero, the blue (AI) is up. The downward-sloping trend lines show a negative correlation between short interest and stock performance.

Regarding short squeeze risk and crowded shorts data, none of the AI-exposed Mega caps fall into the crowded category. Their average squeeze score is 35, with a crowded score of 28.

Among pure-play AI stocks, 40% hold a maximum squeeze score of 100, while the group averages 58 and 57 for crowded score. The 100 squeeze names are Soundhound AI (SOUN), Symbotic (SYM), Tempus AI (TEM), and Recursion Pharma (RXRX).

Quantum computing stocks post squeeze scores above 70, likely a result of their recent 20% rally this week, though their crowded scores remain lower. These stocks are IONQ, Rigetti (RGTI), D-Wave Quantum (QBTS) and Quantum (QUBT).

On the long side, across all three groups, active long holdings tend to increase during market declines and contract during rallies—a pattern consistent with value or mean-reversion strategies.

Quantum stocks have seen the largest rise in institutional long holdings data, reflecting a transition from IPO-stage to broader ownership. Pure-play AI stocks show a modest uptick, while AI-exposed Mega cap holdings remain relatively stable.

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The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC (“S3 Partners”) to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks, and merits, as well as the legal, tax, accounting, and investment consequences, of such decisions.

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