Hedge funds face significant losses amid technology stock selloff

Global hedge funds have experienced their sharpest setbacks in recent years as a widespread selloff in technology stocks triggers deleveraging and the unwinding of artificial intelligence-related positions.

According to reports from Goldman Sachs, systematic long-short hedge funds recorded their worst weekly performance since 2024, while all three major tracked strategies—fundamental equity long-short, systematic, and multi-strategy—suffered daily losses exceeding 1% on October 22. This marked the first time all three categories saw such simultaneous declines since the pandemic-era market volatility.

The downturn is largely attributed to mounting concerns regarding the sustainability of AI infrastructure spending, stretched valuations, and rising borrowing costs. Goldman Sachs identified approximately $20 billion in technology-stock selling over a two-week period. The volatility has impacted major players, with Meta Platforms and Nvidia seeing significant declines, contributing to a sharp drop in the Nasdaq 100.

Beyond the United States, the selloff has extended to Asian markets, particularly affecting managers with exposure to Chinese and South Korean equities. While many fundamental long-short strategies remain up for the year, the rapid deterioration in tech-focused and Asia-focused funds has highlighted the vulnerability of concentrated positions to abrupt market reversals.