Goldman Sachs: Hedge funds took huge losses as AI rally lost momentum in July

According to Goldman Sachs, hedge funds suffered significant losses as the AI rally lost momentum in July. The bank said the pullback in AI-related stocks forced managers to unwind some of their heavy positions, resulting in one of the strongest de-grossing periods of the past 10 years. 

It noted, “Our Hedge Fund VIP list of the most popular long positions suffered its worst 1-month underperformance vs. the S&P 500 in more than 20 years of history, and July marked one of the sharpest hedge fund de-grossing episodes of the past decade.”

At the moment, hedge funds are pulling back fast from AI stocks, according to the bank.

Hedge funds lost over 3% of their profits in July

Goldman asserted that hedge fund performance, leverage, and key long positions have shifted considerably as AI trade changed course. Data from across Wall Street also support this cooling-off period.

Similarly, JPMorgan in early August contended that tech sell-offs wiped out 3% of hedge fund gains in July.

According to their analysts, fund managers got trapped in overcrowded tech positions, creating a bottleneck that prevented speculators from cashing out before their profits vanished.

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