Global hedge funds hammered by AI sell-off this week, Asia managers lead losses

Published Sat, Oct 17, 2026 · 09:53 AM

[TOKYO/NEW YORK] Global hedge funds suffered steep losses this week, battered by a sharp unwind of a swathe of artificial intelligence bets, with Asia-focused funds hit the hardest.

Investors are increasingly questioning whether massive AI spending can pay off anytime soon as elevated inflation keeps borrowing costs high. Wall Street ended the week sharply lower on Friday (Oct 16), with AI-related technology stocks including CoreWeave and Broadcom under renewed pressure, while a jump in oil prices spooked traders heading into the weekend.

CoreWeave has been one of the biggest casualties of the latest sell-off, with the data centre operator’s bonds selling off sharply this week, pushing yields above 15 per cent.

Global fundamental long-short funds, or stock pickers, lost money every single day this week, the Goldman Sachs prime brokerage unit said in a note to clients, with losses for the week to Thursday coming to 2.9 per cent. For the year to date, they have gains of 14.3 per cent.

“Following a sharp AI unwind on Wednesday and week over week, global equities were net sold again (on Thursday) though at a much slower pace, driven by continued risk unwinds with long sales outpacing short covers,” Goldman said in the note on Friday.

“In dollar terms, yesterday’s global de-grossing activity – long selling and short covering combined – was roughly half of what we saw on Wednesday.”

Goldman added that global AI stocks collectively have been sold by long-short fund managers for six straight sessions.

On Thursday, hedge funds across strategies retreated sharply, with stock pickers globally losing 0.9 per cent. Among them, Asia-focused managers were down 2.6 per cent, while tech-focused funds were off 2 per cent. Global systematic long-short managers and multi-strategy funds also declined roughly 1 per cent.

“What we saw was less a fundamental rejection of AI and more a classic, high-velocity unwind of a crowded trade meeting a macro reality check,” said Bruno Schneller, managing partner at Erlen Capital Management, which invests in hedge funds.

“Hotter-than-expected US inflation data forced markets to reassess the path of interest rates, putting immediate pressure on the most capital-intensive parts of the AI complex.”

US inflation data this week increased expectations of further rate ⁠hikes, fueling declines in semiconductor and AI supply chain stocks.

Semiconductor-heavy markets bore the brunt of the sell-off. South Korea’s benchmark Kospi tumbled 8 per cent to close at a ‌six-month low on Thursday, while Taiwan stocks also lost more than 3 per cent.

“From Covid through end-2025, all three broad strategies never fell more than 80 basis points on the same day,” Goldman Sachs said in an earlier note from Thursday, referring to fundamental equity long-short, systematic and multi-strategy trades.

The note added that this has now occurred three times this year: on Feb 4, Jul 28 and Oct 15.

Asia-focused stock pickers have lost 6.8 per cent for the first half of this month and have erased more than half of the gains from their late-June peak, when they were up more than 40 per cent for the year, according to Goldman Sachs.

“The interesting thing about this sell-off is that it exposes just how much of the hedge fund industry has effectively been trading the same underlying theme, even when portfolios look very different on paper,” said Schneller. REUTERS