Hedge funds are increasingly betting against stocks, with Nvidia (NVDA), Advanced Micro Devices (AMD) and Tesla (TSLA) as their top three shorts placed on Wednesday, a Morgan Stanley note showed Thursday.

Wednesday was the third largest day of single stock selling by hedge funds this year, according to the bank's institutional equity division, led by the technology sector.

Hedge funds mostly added short positions, or bets stock prices will fall, to their portfolios, although they also slightly trimmed long exposures, Morgan Stanley added.

The hedge funds' move illustrates how hedge funds are becoming more bearish about the stock market after back-to-back years of gains of over 20% in the S&P 500. The index is down 2.6% this year, as concerns about U.S. trade policy weigh.

Their targeted short bets on companies such as Nvidia and Tesla also underscore hedge funds seeing at least some of the once popular Magnificent Seven shares of the biggest U.S. tech firms as expensive.

Except for Meta Platforms, shares in all other Mag-stocks are underperforming the S&P, with Elon Musk's carmaker Tesla down over 28% this year, while Nvidia fell more than 15%.

Still, Morgan Stanley showed funds unwound short bets on Apple and Alphabet on Wednesday.

Hedge funds' bearishness is not only concentrated in the United States. Portfolio managers net sold European construction materials-focused companies, as well as financials and energy.