Tech and AI: Hedge Funds Reduce Exposure at Unprecedented Rate in Ten Years

Funds are reducing their bets on tech. Hedge funds have decreased their exposure to tech stocks at the fastest rate in at least ten years, according to data from Goldman Sachs covering the five sessions ending October 15. This movement accompanies a weekly decline of 5.5% in the Nasdaq 100, amid concerns about valuations and the financing of artificial intelligence infrastructure.

Key Points

• Goldman Sachs notes the largest percentage reduction in tech exposure over five sessions since it began tracking data in 2016.
• Semiconductors account for the largest dollar losses among the tracked funds.
• Despite the sell-off, technology still represents 23.5% of their global net allocation.

Hedge Funds Reduce Still High Exposure to Tech

The figures come from Goldman Sachs' prime brokerage activity, which provides financing and execution services to funds. They describe the positions tracked by the bank, rather than the entire global hedge fund universe.

During the studied period, information technology dominates net sales, far ahead of other sectors. Semiconductors also record the heaviest dollar losses. The decline of the Nasdaq 100 over the week marks its worst performance since April 2025.

This correction affects portfolios heavily exposed to AI. When multiple managers simultaneously reduce similar positions, their sales can amplify pressure on the same stocks.

However, funds have not exited the sector. Technology still accounts for 23.5% of their global net allocation, a level situated in the top tenth of observations over the past five years.

Thus, it is a rapid disengagement from a historically high exposure. The data do not allow for a conclusion of a lasting abandonment of artificial intelligence. They mainly show that managers are reducing their risks after having significantly participated in the rise.

Some funds heavily exposed to AI are reducing their positions -- Source: Account X

CoreWeave Crystalizes Concerns Over AI Financing

Tensions surrounding CoreWeave illustrate market concerns. On October 14, the stock of the computing capacity provider lost about 15%, while the yields on some of its bonds reached or exceeded 15% in the secondary market.

These yields increase when bond prices fall. They reflect a higher required return by investors but do not automatically correspond to the rate paid on all existing debt.

CoreWeave finances a significant part of its development through borrowing. The market is thus questioning its ability to convert computing demand into sufficient revenue to cover its investments and financial commitments. Its management highlights its order book to defend the strength of this model.

Analyses remain divided, however. Goldman Sachs raised its recommendation on CoreWeave to buy on October 19, notably emphasizing the tensions in the supply of computing capacity. This position pertains to the analysis of the stock and is distinct from the bank's data on sales made by its hedge fund clients.

The correction thus reveals a more selective approach to investments related to AI. Demand growth remains an argument, but valuations, financing costs, and profitability now occupy a central place in the evaluation of companies. So, bubble or not bubble?

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