Hedge Funds Slash Tech Exposure at Record Pace Amid AI Trade Unwind

Hedge fund clients of Goldman Sachs have executed their sharpest proportional cut to technology stock holdings since 2016, rapidly de-risking positions in the five trading days leading up to October 15, 2026. This aggressive selling saw the Nasdaq 100 tumble by 5.5%, its worst weekly performance since April 2025, as the once-dominant 'AI trade' showed clear signs of unwinding. The move indicates a significant shift in investor sentiment away from the high-flying tech sector. The retreat was primarily driven by a sharp global decline in technology shares, with semiconductors bearing the biggest dollar loss as concerns about an AI bubble grew. Despite these drastic cuts, technology still represents a substantial 23.5% of Goldman's global prime brokerage book, a level that remains in the 90th percentile over the last five years, suggesting that while funds are reducing risk, they are not entirely abandoning the sector. Simultaneously, hedge funds have lowered their net leverage to a one-year low, signaling a broader cautious stance, and have begun to favor more defensive sectors like healthcare and consumer staples. Looking ahead, the market will be keenly watching whether this unwinding of the AI trade continues to put downward pressure on tech stocks, especially given their still-elevated portfolio weighting. The shift towards defensive sectors suggests a sustained period of risk aversion, potentially impacting market leadership. Investors should monitor upcoming tech earnings reports for further clues on the sector's health and how long this cautious sentiment might persist among major funds.