Hedge funds unwind all AI buying since 2025, Goldman says

Hedge funds have sold off every AI stock purchase they made since early 2025. Goldman Sachs The Goldman Sachs Group, Inc. ↘ 0.29% prime brokerage data show the funds net sold global AI stocks for five straight sessions in October, reversing all of their net buying in the sector since the start of 2025. The selling was mostly funds closing positions they already held. Goldman figures show they sold existing longs about 3.5 times faster than they opened new short bets, which points to cutting risk rather than betting on a crash.ndtvprofit.com+1

Funds also sold about $20 billion of technology stocks in two weeks. That is close to the $23 billion unwind in July, according to Forbes.forbes.com

Worst day since 2011

The pressure peaked on Thursday, October 22. Goldman's basket of hedge funds' favorite stocks fell 4.2% that day, its worst daily drop since 2011, leaving it down 10.4% for the month. "If last Thursday felt bad, today has been worse," Goldman's prime brokerage team told clients. All three major strategies the bank tracks lost more than 1% on the same day, something that had not happened since the pandemic. One trigger was Meta ↗ 2.36%, whose shares fell after it said it would issue a new class of shares to fund its AI spending. Nvidia ↗ 2.29% and the Nasdaq Composite also fell.reuters.com+1

Morgan Stanley's ↗ 0.19% prime brokerage team said global hedge funds have cut more than 8% of their gross exposure since June. It called this the biggest unwind since at least 2017. Memory chipmakers took much of the damage. Samsung Electronics, SK Hynix ↗ 2.09%, Micron ↗ 2.58% and SanDisk ↗ 4.78% lost more than $700 billion in combined market value in under two weeks.x.com+1

Leverage, not demand

Macro investor Jordi Visser says the selloff comes from borrowed money, not weak AI demand. He estimates the leverage took 18 months to build and 75 days to unwind. Funds have not left the sector entirely. Technology still made up 23.5% of Goldman's global prime book, which is in the 90th percentile of the past five years.finance.yahoo.com+1

Signs of easing

Goldman derivatives strategist Brian Garrett now sees seven signs the selling may be running its course. Net leverage at US fundamental long/short funds has fallen to 47%, in the 7th percentile of the past year. Garrett said that level has historically matched S&P 500 ↗ 0.30% declines of more than 20%, yet the index was only about 3% below its record. He also pointed to cheaper valuations, with the forward price-to-earnings ratio near 19 times, the lowest of 2026. Another sign was breadth: 406 S&P 500 stocks rose on a day the index fell.thedarksideoftheboom.substack.com+1

Garrett said any relief from hyperscalers borrowing less in bond markets would "take time to materialize".finance.biggo.com