Hedge funds sold technology stocks last Thursday at their fastest pace in two years, in what Goldman Sachs strategist Tony Pasquariello described as Wall Street's biggest rout since July.
The selling followed a year in which hedge funds had built unusually heavy exposure to AI beneficiaries, with Goldman putting funds' net allocation to technology at 23.5% of global investments, around the 90th percentile of the previous five years.
Over the five sessions through 15 October, funds cut technology exposure at the fastest rate in Goldman's records, which extend back to 2016, with semiconductors hit hardest in dollar terms given their central role in the AI buildout.
The selling was not confined to technology: global equities were net sold at roughly two standard deviations above the previous year's normal flow.
And the Nasdaq 100 fell 5.5% in the week through 15 October, its steepest weekly drop since April 2025, even as the S&P 500's headline level had moved sideways for about three months while the AI trade suffered a sustained drawdown since late June beneath the surface.
Goldman said the underlying question as economic rather than technical: whether the enormous capital expenditure behind AI infrastructure will generate adequate returns, and the bank described conviction in the trade as limited, favouring selective over broad AI exposure.
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