AI selloff hits hedge funds, Asia managers lead losses

Global hedge funds took heavy losses this week as investors rapidly unwound bets on artificial intelligence. Funds focused on Asia were hit hardest, Reuters reported, citing a Goldman Sachs The Goldman Sachs Group, Inc. ↗ 4.67% prime brokerage note. Global fundamental long-short funds, the stock pickers, lost money every day of the week. Their loss for the week to October 15 came to 2.9%, but they are still up 14.3% for the year.reuters.com

The losses come as investors increasingly question whether huge AI spending will pay off soon, while high inflation keeps borrowing costs elevated, according to Reuters.reuters.com

A rare broad retreat

The heaviest day hit every type of strategy. Global stock pickers lost 0.9%, Asia-focused managers fell 2.6% and tech-focused funds dropped 2.0%. Systematic long-short and multi-strategy funds each fell roughly 1%, Hedgeweek reported.hedgeweek.com

"From COVID through end-2025, all three broad strategies never fell more than 80bps on the same day," Goldman said. It added that this has now happened three times in 2026: on February 4, July 28 and October 15, Reuters reported.reuters.com

Asia-focused stock pickers have lost 6.8% so far in October. That wipes out more than half the gains they held at their late-June peak, when they were up more than 40% for the year, according to Goldman's data. A separate Goldman report said hedge funds sold more global AI stocks than they bought for five straight trading days from October 8 to 14. That reversed all their net buying since early 2025, Odaily reported.odaily.news+1

Inflation fuels chip rout

US consumer prices rose 3.7% from a year earlier in September, up from 3.4% in August and above forecasts. The Nasdaq Composite fell the most of the major US indexes after the report, AFP reported. The data raised expectations that the Federal Reserve will hike rates again. Traders put the chance of a hike at the October 28 meeting at about 31.6%, Reuters reported, citing CME Group's ↘ 0.45% FedWatch tool.reuters.com+1

Markets heavy in chip stocks took the worst of it. South Korea's KOSPI fell about 8% on October 15 to a six-month low, and Taiwan stocks lost more than 3%, Reuters reported. Samsung Electronics and SK Hynix ↗ 5.53% each dropped more than 10% that day, LGT reported, amid worries about Chinese competition and AI valuations.lgt.com+1

More selling ahead

Goldman's view of what comes next is cautious. Overall gross leverage in its prime book was about 310%, near a five-year high. Hedge fund exposure to AI stocks is still high when measured over three years, which suggests the deleveraging may be closer to its start than its end, Odaily reported. Rachel Hu of Goldman's Asia team said traders in Taiwan reported less "capitulation" than in July, a sign that more selling could still be coming.odaily.news