Hedge funds have reversed all of their net buying of artificial intelligence (AI) stocks accumulated since the beginning of 2025 in just five trading sessions, according to data from Goldman Sachs. The rapid shift in positioning highlights a significant retreat from technology shares, with hedge funds also selling approximately $20 billion worth of technology stocks over a two-week period.

Goldman Sachs' prime brokerage desk recorded five consecutive sessions of net selling in global AI stocks by its hedge fund clients. That selling was sufficient to erase all of the net purchases accumulated since the start of 2025, marking a sharp reversal in institutional positioning toward AI-related equities.

Prime brokerage desks sit within investment banks and record the trading activity and positions of their hedge fund clients, which makes their flow data one of the most direct windows into how institutional investors are actually repositioning. Readings of this kind capture executed client activity rather than survey responses, and are therefore widely used as a gauge of institutional positioning.

Hedge Funds Accelerate Technology Stock Selling

The scale of the selling extended beyond AI-focused investments. Hedge funds disposed of approximately $20 billion in technology stocks over two weeks, according to figures cited by Coin Bureau. The data suggests institutional investors were reducing existing positions rather than simply adjusting their exposure through new short bets.

Goldman's figures indicated that selling of stocks already held by hedge funds occurred at 3.5 times the pace of new bearish positions against AI stocks. The distinction is significant because it indicates the reduction in exposure was driven primarily by investors liquidating existing holdings, rather than relying mainly on strategies designed to profit from falling share prices.

The consecutive selling sessions also indicate that the reversal was concentrated within a relatively short period. By eliminating all accumulated net AI stock purchases since the beginning of 2025 in just five sessions, hedge funds effectively erased their previous buying activity in the sector.

Hedge Fund Favorite Stocks Record Sharp Decline

The shift in positioning coincided with a substantial decline in a basket of stocks favored by hedge funds. According to Goldman Sachs data, the bank's basket of hedge funds' most popular stocks fell 4.2% on October 22.

That daily decline represented the basket's worst performance since 2011, underscoring the scale of the pressure affecting stocks heavily represented in hedge fund portfolios. Because such baskets are constructed from the stocks most commonly held across hedge fund portfolios, their movements are often read as a measure of how crowded institutional positions are performing. The figure provides another indication of the extent to which institutional positions were exposed during the market downturn.

Broad Equity Exposure Sees Largest Reduction Since 2016

The reduction in risk was not limited to artificial intelligence and technology shares. Across the broader equity market, hedge funds cut approximately 7.8% of their total stock exposure, according to Morgan Stanley data cited by Steno Research.

The 7.8% reduction was the largest recorded in Morgan Stanley's data series, which dates back to 2016. This places the latest adjustment among the most significant contractions in hedge fund equity exposure captured by the dataset, and a series of this length allows the current episode to be measured directly against earlier periods of de-risking.

Taken together, the figures from Goldman Sachs and Morgan Stanley point to a broad retreat from equity positions among hedge funds. The full reversal of AI stock buying, approximately $20 billion in technology stock sales over two weeks, and the 7.8% reduction in overall equity exposure illustrate the scale of the reported repositioning.

Goldman's data specifically shows that hedge funds erased all of their net AI stock purchases since the start of 2025 in five consecutive trading sessions, while the 4.2% decline on October 22 marked the worst daily performance for the bank's hedge fund favorite-stock basket since 2011. Subsequent prime brokerage and exposure readings will show whether the retrenchment extended beyond the period covered by the current figures.

Source: Hokanews. Writer: Victoria Hale, Technology & Blockchain Writer.