Hedge funds have reduced their exposure to US technology stocks at the fastest pace on record as persistent volatility across artificial intelligence and semiconductor shares prompts investors to cut positions, according to a report by Bloomberg citing a note from Goldman Sachs.
Data from the bank’s Prime Services desk, led by Vincent Lin, shows hedge funds were net sellers of US technology stocks in six of the past eight weeks. Since early June, the group’s aggregate market exposure to the sector has fallen by around 10% in market value terms, representing the largest reduction since Goldman began tracking the data more than a decade ago.
The retreat comes amid a sharp correction across AI-related stocks, particularly semiconductor, memory and AI infrastructure companies, where investors have been unwinding previously crowded positions.
Goldman said the sustained selling suggests technology-focused hedge funds have been aggressively reducing long exposure, with signs emerging that some managers may be capitulating following weeks of market turbulence.
The broader technology sector has weakened considerably over the same period, with the S&P 500 Information Technology Index falling about 10% since early June. Investors have increasingly questioned whether AI-driven valuations remain justified and have rotated capital into more defensive areas of the market, including consumer stocks, amid concerns that major technology companies could moderate their spending on AI infrastructure.
Prime brokerage data also showed technology was the most heavily sold US sector last week. Hedge funds reduced long positions while simultaneously increasing short exposure, making it the weakest-performing sector over the period.
Selling was broad-based across the industry, with technology hardware, storage and peripherals, along with IT services companies, seeing the largest reductions in positioning. Semiconductor and software stocks also experienced net selling, although to a lesser degree.
Separately, Goldman Sachs strategists led by Ben Snider said the recent volatility affecting popular AI infrastructure stocks has encouraged investors to reassess opportunities in other sectors.
The strategists believe momentum-driven AI infrastructure trades could continue to face headwinds in the near term, citing investor positioning, recent price action and the absence of an obvious catalyst, despite maintaining a constructive view on the sector’s longer-term fundamentals.
