Hedge funds cut tech positions as AI trade volatility spikes
Goldman Sachs data shows hedge funds reduced tech stock positions by $20 billion, the largest cut since July, amid volatility that exceeds historical crisis levels. Bank of America describes the move as a positioning hiccup, while Goldman suggests the market may be nearing stabilization.
Goldman Sachs trading desk data indicates hedge funds reduced positions in tech stocks by approximately $20 billion over the last two weeks, the largest reduction since July. This occurred despite the S&P 500 losing only 0.5% on a weekly basis. The Goldman Momentum Index shows trend stocks have experienced 30 days with moves exceeding 5% this year, surpassing volatility levels seen during the 2000 dot-com bubble, 2008 financial crisis, and 2020 pandemic. Bank of America describes the current market movement as a positioning hiccup rather than a fundamental weakness in the AI trade, noting that defensive stocks like consumer goods outperformed tech by 6 percentage points on Thursday. Apple is currently negatively correlated with the Nestec 100, acting as a safe haven and an anti-AI bet due to its limited AI investment exposure. Goldman Sachs trader Brian Garrett suggests the market may be in the 'eighth inning' of the AI sell-off, implying a near-term stabilization, provided bond markets calm down and AI investments prove profitable.