Hedge Funds Dump AI Stocks and Cut Tech Exposure

Hedge funds have rapidly reversed their buying of AI stocks, selling in five consecutive sessions from 8 to 14 October and wiping out all their net purchases since the start of 2025. Goldman Sachs data show that over two weeks they cut about $20 billion in technology stocks, mainly by selling existing positions: they sold existing AI holdings 3.5 times faster than they opened new short positions. The retreat followed a broader reduction in risk exposure. Goldman said technology shares led equity outflows, while funds shifted towards healthcare and consumer staples. A Goldman-tracked basket of hedge-fund favourites fell 4.2% on 22 October, its biggest one-day drop since 2011. Separately, Morgan Stanley data cited by Steno Research showed hedge funds reduced overall equity exposure by about 7.8%, the largest decline in that series since 2016. Despite the sales, AI stocks still accounted for 26.1% of global single-stock net exposure, a high level by historical standards. Gross leverage remained near a five-year high even as net leverage fell sharply, and Goldman warned that further deleveraging could follow, particularly amid foreign outflows from Asian markets. For crypto traders, the hedge-fund retreat from AI stocks is a sign of weaker appetite for risk assets and could add to volatility across markets, including crypto, though the reports cite no direct cryptocurrency positions or price moves.