Hedge funds piled into short positions on US stocks as concerns about disruption to business models from artificial intelligence reverberated through markets.
Notional short selling across single stocks last week was the biggest on record in Goldman Sachs Group Inc. data going back to 2016, the bank’s prime brokerage team said in a client note. Short sales outpaced long buys by a magnitude of two-to-one, the team including Vincent Lin said, citing flows from the Jan. 30 to Feb. 5 period.
Anxiety over how AI will transform the economy boiled over into a turbulent week on Wall Street, with a selloff sparked by Anthropic PBC’s new tools designed to automate work tasks in a number of industries. A group of 164 stocks in the software, financial services and asset management sectors lost $611 billion in market value last week.
Overall, hedge funds net sold US equities for a fourth week and at the heaviest rate since the so-called Liberation Day in early April.
Information technology was the most heavily sold sector, posting the second-largest dollar outflows in the past five years, the Goldman team said. Software dominated the retreat, accounting for about 75% of net selling within the sector. The funds’ aggregate net exposure to software equities fell to 2.6%, while the long-short ratio slid to 1.3 — both marking record lows.
Semiconductors and semiconductor equipment, along with IT services, were among the few technology-related areas to see net buying during the week. A gauge of semiconductor stocks rose last week, deepening the divergence between chip stocks and software shares that’s been widening in recent months as investors punish the industries they worry could be disrupted by AI.
Outside tech, hedge funds continued to rotate into defensive areas. Health care was the most net-bought sector last week and has now become the top destination for hedge fund inflows year-to-date, overtaking industrials, the Goldman team said.
Stocks rebounded on Friday as dip-buyers emerged, although the Nasdaq 100 still notched its worst week yet this year. US equity futures were relatively muted on Monday morning, with contracts on the S&P 500 sliding as much as 0.5% before paring the drop.
Written by: Natalia Kniazhevich — With assistance from Neil Campling @Bloomberg
The post “ Goldman Says Hedge Funds Add Record Shorts on US Stocks in Rout” first appeared on Bloomberg