Hedge funds slash tech exposure at fastest pace in a decade

Hedge funds drastically reduced their exposure to technology stocks over a five-day period ending on October 15th, marking the most significant decline in at least a decade, according to Bloomberg's analysis of Goldman Sachs prime brokerage data. This sharp reduction in technology positions occurred alongside a global sell-off in AI-related equities, leading to extensive portfolio liquidations.

The period in question marked the largest proportion of technology sector outflows since 2016, with gross trading activity also contracting at its fastest pace in nearly three months. The Nasdaq 100 experienced a 5.5% decline over the week, its steepest drop since April 2025, signaling a broader reversal in the AI trade. Technology stocks, as a sector, performed the worst within the MSCI World Index during the same timeframe.

Goldman Sachs' records revealed that global equities were net sold at a rate matching two standard deviations of historical flows observed over the past year. Notably, technology accounted for the most substantial dollar outflows, with semiconductor stocks witnessing the largest reductions. Despite these substantial withdrawals, hedge funds continue to maintain a significant exposure to technology, accounting for 23.5% of Goldman Sachs' global prime brokerage assets.

However, the sector's position remains defensive, with net leverage falling to a one-year low of 48.6%, as hedge funds reduced their long positions relative to short ones.