Key Takeaways
- • Hedge funds net sold global AI stocks for five consecutive sessions, erasing all net buying in the sector accumulated since the start of 2025, according to Goldman Sachs prime brokerage data.
- • Goldman Sachs' prime desk recorded about $20 billion in technology stock selling over two weeks, close to the $23 billion unwind seen in July, per Reuters (October 26).
- • Goldman's hedge fund favourite basket fell 4.2% on October 22, its steepest single-day drop since 2011; Morgan Stanley data cited by Steno Research showed a roughly 7.8% cut in hedge fund exposure, the largest reduction in the series since 2016.
- • Samsung Electronics, SK Hynix, Micron and SanDisk lost more than $700 billion in market value in under two weeks, with chip stocks down 15.6% in October versus a sub-1% decline in the S&P 500.
- • Technology still represented 23.5% of Goldman's global prime book, in the 90th percentile of the past five years, suggesting a positioning reset rather than a wholesale exit.
Summary
Hedge funds have reversed all of their net buying in global artificial intelligence stocks accumulated since the beginning of 2025 within just five trading sessions, according to data from Goldman Sachs' prime brokerage desk. The rapid reversal, together with roughly $20 billion in technology stock sales over two weeks, has prompted questions over whether the AI trade is beginning to crack or whether investors are simply reducing exposure to an increasingly crowded market.
The Goldman data shows funds net selling for five consecutive sessions, with the selling concentrated in existing holdings at roughly 3.5 times the pace of new short positions. This suggests managers have been focused on booking profits and reducing risk rather than actively betting against the sector. Reuters reported on October 26 that the roughly $20 billion in technology selling was close to the $23 billion recorded during a major unwind in July. Goldman's basket of hedge fund favourites fell 4.2% on October 22, its steepest single-day decline since 2011. Separately, Morgan Stanley data cited by Steno Research showed hedge funds cutting around 7.8% of overall exposure, the largest reduction in that series dating back to 2016.
The sell-off has reached companies at the centre of the AI infrastructure build-out. Samsung Electronics, SK Hynix, Micron and SanDisk collectively lost more than $700 billion in market value in less than two weeks, and chip stocks fell 15.6% in October compared with a decline of under 1% in the S&P 500. Reuters, citing a Goldman Sachs note, linked the volatility to doubts about the eventual payoff from AI spending, and highlighted a roughly 10% fall in Meta shares in the week after it reported strong earnings but said it would need to raise additional capital for AI investments. Investors appear to be prioritising demonstrable cash-flow conversion over headline earnings and infrastructure demand.
The positioning data does not yet point to a wholesale exit from technology. According to The Economic Times, citing Goldman's prime brokerage data, technology still accounted for 23.5% of the bank's global prime book, in the 90th percentile of the past five years. Analysts frame the move as profit-taking, lower risk appetite and valuation correction after a prolonged rally, which does not necessarily signal weakening demand for AI technology. The next phase will depend on whether companies can convert rising capital expenditure into sustainable revenue, margins and cash flows; if monetisation lags investment, the correction could develop into a more fundamental reassessment of AI valuations.
The Goldman data shows funds net selling for five consecutive sessions, with the selling concentrated in existing holdings at roughly 3.5 times the pace of new short positions. This suggests managers have been focused on booking profits and reducing risk rather than actively betting against the sector. Reuters reported on October 26 that the roughly $20 billion in technology selling was close to the $23 billion recorded during a major unwind in July. Goldman's basket of hedge fund favourites fell 4.2% on October 22, its steepest single-day decline since 2011. Separately, Morgan Stanley data cited by Steno Research showed hedge funds cutting around 7.8% of overall exposure, the largest reduction in that series dating back to 2016.
The sell-off has reached companies at the centre of the AI infrastructure build-out. Samsung Electronics, SK Hynix, Micron and SanDisk collectively lost more than $700 billion in market value in less than two weeks, and chip stocks fell 15.6% in October compared with a decline of under 1% in the S&P 500. Reuters, citing a Goldman Sachs note, linked the volatility to doubts about the eventual payoff from AI spending, and highlighted a roughly 10% fall in Meta shares in the week after it reported strong earnings but said it would need to raise additional capital for AI investments. Investors appear to be prioritising demonstrable cash-flow conversion over headline earnings and infrastructure demand.
The positioning data does not yet point to a wholesale exit from technology. According to The Economic Times, citing Goldman's prime brokerage data, technology still accounted for 23.5% of the bank's global prime book, in the 90th percentile of the past five years. Analysts frame the move as profit-taking, lower risk appetite and valuation correction after a prolonged rally, which does not necessarily signal weakening demand for AI technology. The next phase will depend on whether companies can convert rising capital expenditure into sustainable revenue, margins and cash flows; if monetisation lags investment, the correction could develop into a more fundamental reassessment of AI valuations.
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