Goldman Sachs note flags hedge funds' fastest tech selling in two years as AI trade weakens
A recent selloff in U.S. equities is exposing deeper strain beneath the S&P 500's three-month range-bound performance. Hedge funds accelerated sales of technology stocks last Thursday at the quickest pace in two years, raising concerns about confidence in the AI-driven market trade.
Highlights
- Goldman Sachs reports hedge funds sold technology shares at the fastest pace in two years during last Thursday's biggest Wall Street rout since July.
- Hedge funds have been reducing both net and gross equity exposure for weeks as the AI trade retraces, revealing a sustained performance drawdown since end of June.
- Weakness in large technology positions and AI-linked stocks signals a broader hedge fund pullback, raising caution across sectors tied to artificial intelligence and growth.
Client note highlights exposure cuts
As reported by Bloomberg, Goldman Sachs Group Inc.'s Tony Pasquariello says hedge funds sold technology shares at the fastest pace in two years last Thursday during Wall Street's biggest rout since July.In a note to clients, Pasquariello, Goldman Sachs' head of hedge fund coverage, writes that the recent market calm has masked a sustained performance drawdown since the end of June as the AI trade retraces. He adds that hedge funds have been reducing both net and gross exposure to equities for weeks.
Market implications for the AI trade
The comments suggest weakness in large technology positions is becoming a broader test of conviction in one of the market's dominant themes. Even with the benchmark index moving sideways over the past three months, the underlying retreat in AI-linked positioning points to more cautious risk-taking by hedge funds.For investors, the shift indicates that pressure on technology stocks is not limited to a single trading session but reflects a wider pullback in equity exposure. That pattern can weigh on momentum in sectors tied closely to artificial intelligence and broader growth expectations.
Our earlier coverage of the AI-linked tech selloff described how hotter inflation data revived rate-hike expectations and intensified pressure on big technology and chip names. We noted that investors were reassessing the cost of financing large-scale AI infrastructure, which helped drive a broader retreat in Nasdaq-related positioning.
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