Key takeaways
- Systematic hedge funds post worst weekly performance since 2024
- Goldman identifies $20 billion in technology stock selling
- Nasdaq 100 plunges 5.5% as AI financing worries spread
Hedge funds suffered their sharpest weekly setback in two years as the Nasdaq 100 plunged 5.5%, with Goldman Sachs identifying $20 billion in technology-stock selling over just two weeks.
Systematic long-short hedge funds lost 2% last week, their worst weekly performance since 2024, according to a Goldman Sachs note reviewed by Reuters on October 26. Fundamental long-short strategies declined another 1.1%, revealing how the latest artificial intelligence selloff has spread beyond ordinary technology investors.
The Nasdaq 100's 5.5% weekly decline was its steepest since April 2025. The pressure followed an earlier semiconductor selloff that erased approximately $1.64 trillion from major chipmakers over six sessions.
Goldman Sachs Reports $20 Billion Tech Stock Unwind
Goldman's prime brokerage operation recorded approximately $20 billion in technology-stock selling during the past two weeks, approaching the $23 billion unwind recorded in July.
The bank also reported the largest reduction in gross single-stock exposure since late July. U.S. equities were net sold for a third consecutive week and in four of the previous five weeks.
The selling adds an institutional dimension to the AI stock correction, which has increasingly reflected concerns about borrowing costs, stretched valuations and the profitability of massive infrastructure investments.
Trend-following funds are especially vulnerable when established market patterns reverse abruptly. As winning technology positions decline, algorithmic strategies may cut exposure, potentially reinforcing market volatility.
Fundamental long-short managers also faced losses. Their strategies were down 3.8% for October but remained up 8.8% for 2026, while systematic strategies were down 1.1% this month and still up 18.7% year to date.
These figures suggest a painful repositioning rather than the disappearance of hedge funds' earlier gains.
Meta's 10% Drop Exposes AI Financing Concerns
Meta became one of the clearest examples of Wall Street's changing attitude toward AI investments.
Its shares fell approximately 10% over the week despite strong earnings, after the company indicated it needed additional capital to support its infrastructure expansion.
The reaction highlights a growing contradiction: companies can report substantial revenue growth while investors become increasingly concerned about the cost of financing future expansion.
Those questions are particularly relevant for AI infrastructure companies, where enormous computing demand must be balanced against borrowing costs, equipment depreciation and construction spending.
Earlier pressure on CoreWeave's borrowing costs showed how quickly financing concerns can spread from bond markets into equity valuations.
Meanwhile, technology fund withdrawals have indicated that some investors are shifting exposure away from the sector even as broader equity demand persists.
