Global hedge funds lost money this week as AI bets unwound, according to Goldman Sachs. Asia-focused funds took the heaviest hit, and the South Korean and Taiwanese stock markets fell with them.
Global hedge funds suffered steep losses this week, according to a Goldman Sachs prime brokerage note, battered by the violent unwind of a swathe of AI bets. Asia-focused funds were hit the hardest.
Global fundamental long-short funds, or stock pickers, lost money every single day this week, Goldman Sachs said. Losses for the week to October 15 came to 2.9%, yet the funds still hold gains of 14.3% for the year to date.
Hedge funds retreat sharply on Wednesday
Hedge funds across strategies retreated sharply on Wednesday, with stock pickers globally losing 0.9%. Among them, Asia-focused managers were down 2.6%, while tech-focused funds were off 2.0%. Global systematic long-short managers and multi-strategy funds also declined roughly 1%.
Goldman Sachs said that from COVID through end-2025, all three broad strategies never fell more than 80bps on the same day. That has now happened three times this year, on February 4, July 28 and October 15.
Inflation data fuels the chip selloff
Hotter-than-expected US inflation data this week increased expectations of further rate hikes, which also fuelled the selloff in semiconductor and AI supply chain stocks. Investors are increasingly questioning whether AI spending can pay off anytime soon as elevated inflation keeps borrowing costs high.
Semiconductor-heavy markets bore the brunt. South Korea's benchmark KOSPI tumbled 8% to close at a six-month low on Thursday, while Taiwan stocks lost more than 3%.
Asia-focused stock pickers have lost 6.8% for the first half of this month. They have erased more than half of the gains from their late-June peak, when they were up more than 40% for the year, according to Goldman Sachs.
Source: Economy News
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