Hedge funds executed a massive sell-off of AI-related stocks over five consecutive days in October 2026. According to Goldman Sachs, this activity effectively reversed all AI-focused purchases made by these funds since the beginning of 2025. Morgan Stanley reports that hedge funds have reduced their total stock exposure by more than 8% since June, marking the most significant retreat observed since at least 2017.
The market impact was substantial, with big tech stocks losing $2 trillion in value in a single week. Memory chip manufacturers, including Samsung, SK Hynix, Micron, and SanDisk, saw their combined market value drop by more than $700 billion in less than two weeks. On October 22, a basket of stocks favored by hedge funds declined by 4.2%, representing the worst single-day performance for this group since 2011.
Analysts attribute the sell-off to the unwinding of leveraged positions rather than a decline in demand. Macro investor Jordi Visser noted that the leverage took 18 months to accumulate and 75 days to unwind. While corporate profits have risen by approximately 20% and SK Hynix projects a memory shortage through 2030, Goldman Sachs suggests that the current liquidation process may be in its early stages, as hedge fund AI holdings remain in the top 17% of the last three years.
