The issue with deflation (on a macro level, one sector isn’t relevant here) is that encourages hording money. To counter that, interest rates have to be lowered. Otherwise you have what’s called a liquidity trap. There comes a point where this lowering of interest rates isn’t sustainable and the economy collapses.

The comparison to shorting a stock is that you can never have enough capital to cover the rise in price. Capital is a limited resource while there is no upper bound on the stock. So there comes a point where you can no longer cover and you lose big time.